How To Set A Salary

how to set a salary

It’s important for any employer to establish a salary for a certain position in their company. But setting a salary is more than slapping a random number onto payroll. Here are a few tips to follow when setting a salary for a certain role or candidate.

Double trouble

It’s important to remember that whatever reasonable salary amount you arrive at will end up almost doubling because of insurance, benefits and other factors. For this reason, you’ll need to first decide how much you can afford spend on the position.

What’s turnover like in that role?

When you are regularly hiring new employees for the same job, it’s time to consider an increase in pay to help decrease turnover in that position. When three or four people have been hired for the same position three or four times over the last year and a half, this is a clear statement that the pay and benefits are not enough to make the job attractive. Figure out why people are leaving the job so often and use that information to improve the next salary package you offer for the position.

Where is the candidate in his or her career?

You may be more likely to hire older candidates over someone straight out of college for upper-level positions. Decide whether it’s worth it to pay the more experienced worker a higher salary or opt for the less experienced candidate who is likely to accept a lower salary.

Is it a competitive salary?

If you are only paying your employees a fraction of what competitor companies are paying their workers for the exact same work, you’ll find it difficult to recruit top-quality candidates for your own company. One method to keep your salary competitive is to provide an extra 10% in benefits for paying your employees 90% of what a competitor is paying. Along these same lines, you might offer a higher salary while providing slightly less in benefits. The package needs to be attractive to prospective employees.

How negotiable is the salary?

Because you might not be signing a specific contract, you’ll have flexibility and more room for salary negotiations when hiring non-union employees. If you are hiring employees who belong to a union, there is no negotiating; you are basically told what to pay them. This can cause the number of positions you fill to be limited. It can also affect the lengths of the employment contracts you sign. For example, you may be unable to sign someone to a valuable position for more than a year or two.

How vital to the company is his or her work?

You have to decide the value of the job when filling a position that doesn’t generate a large amount of income for the company. You can determine the value of each role by deciding which are the largest and smallest contributors to company productivity. For example, the receptionist is among the highest paid employees in many offices based on the simple fact that he or she is the face of the company when greeting customers.

Are there any extra perks that come with the position?

Some of the workers you recruit may not need to commute to and from the office each day. This savings on gas money could be factored into their compensation, while a person who is driving to and from work every day could similarly have that somehow factored in. Along these same lines, employees could receive a higher salary, be give more days off and have a travel expense account if they travel more often for the job. With these kinds of bonus offers the employee’s total pay is increased, but the salary also needs to be fair to keep the worker happy.