How and how much to pay your employees is an ever-difficult dilemma as a small business owner. Employees often feel that they are undercompensated, and business owners must be weary of the bottom line. It can be very difficult to know how to properly value a position or an employee. Here are a few steps to make the process easier.
Write a Job Description
Start by knowing what it is that you need this person to do, and those requirements can help solidify what a person should make. Indeed offers information to guide you through the process of crafting your job description. Once you have the job description you can now begin research to determine fair compensation for that position.
Find Median Pay
Underpaying and over paying employees can be equally detrimental to your business. If you under pay you lead your employees to be constantly looking for new opportunities. If you over pay, you hurt your bottom line and can damage morale among other employees. It is important to have an idea of what your competitors are paying, or what the median income is. When trying to calculate what to pay your employees this is a good resource.
Assess Value & Growth Potential
Now that you have an idea of what the median pay for the position is, you need to determine the value of this position to you and your business. While the median tells you what to pay the average employee in that your needs may be above or below the average output. Is this a position that can grow into a more important role or for which the individual might promote from? Or is this simply a position with limited mobility and limited value? This is something important to consider.
Bonuses & Non-Cash Compensation
Not all compensation and value to the employee value have to come in the way of cold hard cash and not all cash compensation has to be guaranteed. Consider how to pay your employees in non-cash compensation that provides recognition and shows your appreciation. (In today’s world a flexible schedule, awards, high praise, and advancement opportunity are just a few.) For those more focused on the bottom line, bonuses that drive the behaviors and results you seek can be great tools. This can be a great way to motivate high achievers, even in an entry level position. (Note: Ensure that bonuses are based on metrics that the employee can effect each day.)
Now that you have a road map to help you decide what to pay your employees, jump right in and see where it takes you. You may be very surprised how the right compensation plans can motivate both current and new employees.
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