Determining what to pay new hires is always a tricky exercise. Employers have to attract qualified candidates while making sure that new hires aren’t being paid “out of scale” compared to their current workforce. Oh, and there’s always that pesky little problem of operating budgets.
This is an issue that affects both small and large organizations equally. Even if large enterprises have well-designed pay schedules, they have to keep them updated in response to market changes. Small businesses, on the other hand, rarely have access to good salary data to compare their payroll to the wages offered in the market.
The first rule to follow when setting pay is to know the function you’re hiring for. Only pay for the tasks and responsibilities of the job itself.
This is where many employers get turned around. The salary for a position has very little relation to the specific experience, skill set, or tenure of the individual employee. In fact, the salary should be based solely on the description of the position and the scope of the role within the business. Think of it this way: How could you possibly know what a fair wage is for every individual job seeker who may respond to your job posting? Everyone is unique and possesses specific skills that he/ she thinks are more valuable than the next person’s.
Follow this easy process to calculate the right salary range:
Write a clear and accurate position description that includes the actual functions performed and the areas of responsibility (less is more when listing duties).
Compare and select the standard occupation that best matches the job so that you can find the market wages. (I’ll share how to find accurate market data in Part 2).
Finally, with market wages in hand, establish the pay range for the position and identify the low, mid, and high salary within the range.
No business wants to overpay for resources. The flip side of that coin, however, is that in order to grow a business needs the best resources it can afford. By offering wages that you know are both fair and competitive, you’ll access the top performers across any occupational area.
Love Your Work!