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How should I decide how much to pay my employees?
Home » Small Business » Small Business Payroll » How should I decide how much to pay my employees?In many cases, payroll processing is the easy part; the difficult part is determining how much to pay your employees. Employee salaries are one of the dominant factors in attracting and retaining your employees, and the wages you pay an employee enables him to provide for his basic needs, so it is an important issue to both your business and to your employees.
When deciding how much to pay employees, it is a good idea to use the salaries of comparable positions at your competitors. If you pay a comparable amount to other companies, you are more likely to retain your employees and to retain your own credibility as an employer. In addition, comparable salaries enable you to increase salaries appropriately in relation to economic inflation.
Another helpful salary determinant is to consider the value of the position. For example, if one salesperson on your staff brings in $50,000 worth of business each year, you shouldn’t pay him $20,000, but neither should you pay him $200,000. With that in mind, however, don’t forget the intangibles that an employee brings to the table, whether that is positive morale, or reputation, or certain contacts.
Many small businesses offer their employees periodic raises or bonuses. Sometimes these companies offer raises and bonuses based on performance while others offer them at specific times in an employee’s tenure. Whatever your practice is in this area, be consistent and do not practice favoritism.
Finally, keep your payroll practices private and professional. In a small business, word can get around quickly about who gets paid how much and who did or did not get a raise. Avoid that morale-killing gossip by paying employees appropriately and privately. Wages are your small business’s way of saying thank you to the employee and of giving him what he has earned.
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- How should I decide how much to pay my employees?