Once you have decided to open your business, more than likely you are going to need employees. No one can do everything themselves for very long. While going it alone might work in the very beginning, if you ever hope to expand you are going to need help. Before you make your first hire, you must carefully consider all aspects of salary and compensation so you can determine how you will reward your employees and how much you will pay them for the work they perform.
Salary Isn’t The Only Motivator
Before you begin to establish the parameters of your compensation strategy, you must remember that the best employees are motivated by much more than just how much they make. Growth opportunities, recognition and the ability to achieve also factor in an employee’s feeling of proper compensation. On top of that, you must also remember to consider what benefits you plan to offer as they will factor in to your overall payroll costs.
Establish Your Philosophy of Pay
Before you decide what to pay your first employees, take the time to consider what your philosophy of compensation really is. Do you prefer to offer a stronger benefits package and pay your employees a little less or would you prefer to cut back on benefits in order to provide larger salaries? Whatever you decide, this is a significant first step as it will guide the rest of your pay strategies across your entire business.
Find Out What Your Competition Pays
Compile a list of the positions in your company and create a detailed job description for each position. Once you have established the necessary positions, take a closer look at what your competition is paying for similar positions. While you don’t have to organise your pay exactly like your competitors, knowing their pay scales can give you a good starting point to build your pay structures.
Set Your Salary and/or Per-Hour Rates
Now that you have a good understanding of your benefits and what others are paying for the same type of work you can determine what your rates will be. While you don’t have to always pay more than the competitors, you will need to ensure that you set yourself apart from them in some way, whether its better benefits or a more flexible work environment. If you don’t, you may find your workers leaving for higher pay somewhere else.
Factor In Performance-Based Pay Options
Many businesses advocate performance-based pay and incentives by offering bonuses to employees for meeting yearly goals. While not necessarily mandatory, it can be a great way to inspire your employees to achieve in your company. If you do plan on offering performance based incentives, decide ahead of time how much these incentives will be and budget for them assuming all of your employees meet their goals – so you don’t run out of budget.
Determine Raise Policies
Once you have your base rates and performance incentives in place, you must also consider raises. Many employees expect yearly increases for a job well done in addition to standard bonus pay. You must continue to budget for these increments to keep pace with the economy and inflation. If you don’t you will find that your business will lose employees once they learn they are making less than when they started when the cost of living is factored into their salaries.
Determining the proper amount to pay your employees is a difficult task for any business owner. Following these basic steps will allow you as a business owner to determine the best payment policies which provide adequate and fair compensation to your employees. These crucial policies will help keep your staff working at your business while offering the balance and stability needed by a business in a fast-paced and ever-changing economy.