The best way and how much to pay your employees is an ever-difficult dilemma as a small business owner. Employees often feel they are undercompensated, and you must be wary of the bottom line. It can be very problematic to know how to properly value an employee or position. Here are a few steps to make the process easier:
Write a Job Description
Start by knowing what 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 that, you can then begin the research required to determine fair compensation for that position.
Find Median Pay
Underpaying and overpaying can be equally detrimental to your business. If you underpay – you can cause your employees to constantly be on the lookout for new opportunities. If you overpay, you hurt your bottom line and damage morale among other employees. It’s important to have an idea of what your competitors are paying and what the median income is. This is a good resource to help with that.
Assess Value & Growth Potential
Now that you know what the median pay is, you need to determine the value of this position to you and your business. Your needs may be above or below the average, and the median will only tell you what to pay the average employee holding that position. Is this a job that can grow into a more important role or for which the individual might be promoted from? Or is this simply a position with limited mobility and value? These are important questions to answer.
Bonuses & Non-Cash Compensation
Not all compensation and value need to come in the form 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 options to consider. For those more focused on the bottom line – bonuses that drive the behaviors and results you seek are great tools. This is a great way to motivate high achievers even in an entry-level position. (Note: Ensure that bonuses are based on metrics that employees can affect each day.)
Now that you have a road map to help you decide what to pay your employees, jump in and see where it takes you. You may be surprised how the right compensation plans can motivate both long-term and new employees.
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