How to Know What to Pay Your New Hires

Once you have made a decision to hire a particular candidate, you still have an important task ahead of you: determining the compensation package to offer him or her. Ideally, you should have developed a general idea of what you are willing to offer well in advance of initiating the interview process. Even if you have not done so, following these strategies will allow you to present a compensation package that is fair to the candidate and that will be financially viable for your company.

Research the Competition

If you repeatedly lose out on good clients after making an offer, your compensation packages might not be in line with those offered by others in your industry sector. One way to determine the prevailing compensation levels that your competitors are offering is to research job finder websites for job listings from competing companies of similar size with comparable operations.  You don’t have to up the ante and offer more than your competitors, but if your salary and overall compensation packages are well below the industry average, you may need to rethink your company’s compensation structure.

Strike a Financially Viable Balance

It is important to offer employees enough money and other perks to keep them from deserting your company to work elsewhere. However, you must also consider your company’s bottom line to determine what you can realistically afford. Work with your accounting or finance officers to strike the proper balance between sufficiently generous compensation and an expenditure level that your company can maintain over the long haul.  You should include both salary and benefits in executing those calculations.

Define the Specific Roles of the Job

A good job description includes sufficient detail so that you and your new hire are on the same page about day-to-day job performance expectations. A job description can also help you develop a fair compensation package by spelling out specifically what your new hire will be expected to do.  By providing a general description of the various tasks associated with a position, a job description allows you to assign values in dollar amounts to each task and add up the dollar amounts to arrive at a rough salary estimate.

Determine the Value Added by the Position to Your Firm

Ideally, each employee provides value added to your firm. By determining which areas of your firm will benefit from the work expected of your new hire, you can gauge his or her relative value to the company. For instance, if your company sells squishy toys suitable for young children, a top-notch sales force probably holds mission critical status to your company. By contrast, the mail clerk, while important and valued, would naturally command a smaller compensation package than your top level sales staffers would.

Anticipate Future Pay Raises

If your employees perform well, at some point, pay rises are in order. However, if you top out on salary for entry-level employees, you might not have space in your salary cap for raises. This does not mean that you should start employees at an artificially low salary level.  Instead, bear in mind that the salary and compensation package that you offer now will likely not be adequate to hold an employee within your company forever.

Simon Morray is an established entrepreneur. He enjoys blogging about the ins and outs of a successful business from employee management to customer service.

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