To attract and keep talented, productive employees, you need to compensate employees fairly. Coming up with specific salary figures for job positions requires a lot more than guesswork. Each employee's salary must be appropriate for the duties and expectations of the position, the size of your business and the competitiveness of your local market and your industry.
Your profitability, your overall compensation package and the employee's replaceability are also considerations. To determine a salary:
The best contacts and resources to help you get it done
Establish a compensation plan
Decide what kind of pay structure you're going to implement: a standard pay structure (fixed salaries) or an incentive-based structure (base pay plus incentives or bonuses). Incentive-based pay is commonly used for sales positions but is becoming more popular with other positions as well.
I recommend: Get a good grasp of fixed and incentive-based pay structures at
HowStuffWorks.com. Links to compensation resources are available from the
Free Management Library, and the
National Federation of Independent Business (NFIB) and the
Microsoft Small Business Center offer additional tips for setting employee salaries.
Tap online help for setting salaries
Online salary sites offer tremendous help when deciding on what to pay for a specific type of job in your industry or location.
I recommend: See the small business section at
Salary.com.
JobStar has annotated links to more than 300 online profession-specific
salary surveys.
SalaryExpert.com offers a free salary calculator and links to dozens of salary surveys reports and cost-of-living data. The Riley Guide's
salary guides & guidance page has comprehensive links to salary guides and sites that explain how to evaluate them.
Comply with wage and overtime laws
The federal government and individual states have laws regarding minimum wage and overtime pay. Minimum wage laws in your state may vary for certain professions such as commission salespeople or restaurant wait staff. The government defines employees who may be "exempt" from overtime pay.
I recommend: Check
U.S. Department of Labor regulations to decide if a position should be salaried or paid hourly.
Don't forget about benefits
When establishing pay ranges, weigh the value of additional benefits, such as medical and dental coverage; life and disability insurance; and holiday, vacation and sick leave pay. Small businesses can't always offer the same level of benefits as large corporations, but you can offset that by offering attractive, no-cost benefits, such as flexible hours, telecommuting and a casual dress code.
I recommend: Get a quick overview of the importance of offering benefits from the
SBA and find more information about the many types of benefits at
BenefitNews.com. The
U.S. Department of Labor's Bureau of Labor Statistics offers benefits surveys and resources on its Web site.
Set the parameters of incentive programs
If you choose to implement an incentive-based salary, you need to establish how the program will work. What goals will employees need to reach in order to earn the incentive or bonus? Make a certain number of sales in a quarter?Reach a certain dollar amount in sales each month?
I recommend: Salary.com's
CompPlanner can help you administer an incentive-based program.
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