Entrepreneurs have numerous responsibilities when starting a new business, and outfitting the business with a top-notch group of employees is high on the priority list for new business owners. In order to attract the right applicants, business owners will have to establish employee pay grades early on, but they may not know how to begin the task of calculating an employee's worth.
Establishing a budget and price tag for employee services can be more difficult than pricing the services and products the business provides. Many decisions come into play when establishing salaries, perhaps none more important than how much you can afford to pay employees without negatively affecting the bottom line. The following are a few tips to help new business owners establish salaries that will attract top candidates without breaking the bank.
* Research pay scales for similar positions. Online salary calculators can give new business owners a solid foundation on which to establish employee salaries. Networking with fellow professionals also may shed light on salary standards within a given industry.
* Clearly define each job when establishing salaries. Comparing responsibilities as well as job titles can help business owners determine fair salaries for their employees. Salaries for specific job titles can vary significantly, so having an established and specific job description enables you to conduct a more thorough salary comparison.
* Consider cost of living in the city where the business is located. At the very least, salaries should reflect the cost of living in the city where your employees will live and work. Cost of living may run parallel to your operating expenses. If you are renting a space in an area with lofty real estate fees, then you likely know that cost of living nearby is no doubt just as expensive.
* Have a clear picture of your own budget, including operating expenses. Operating expenses need to be considered when determining employee salaries, as you want to keep the business running without going in the red. You may not be able to afford the number of employees you had in mind. It could be better to have a few well-paid employees who get the job done rather than several lower-paid but less reliable workers.
* Set a salary range with room for growth. You want to be in a position to reward hardworking employees, so you won't want to stretch your initial budget by offering high salaries at the onset. Determine the lowest and highest salaries you're willing to pay for each position, and stick to these parameters. This gives you the flexibility to reward good employees and the knowledge that you aren't overpaying underperforming staff members.
* Offer additional perks. Money alone may not be enough to attract employees to your company. Employees may be attracted by location, flexible schedules or the opportunity to learn new skills. Make a list of negotiable perks that can be used as incentives to entice potential employees. Such perks can be especially valuable if or when salary becomes a sticking point.
* Clearly define salary and benefits to prospective hires. When interviewing candidates, make sure that the salarly structure and other incentives are clear and spelled out in writing. This way you avoid any misunderstandings and confusion later on should the person accept the position.