It can be challenging to set salary guidelines for an established business, but this is especially true when you’re just starting a new business. Determining the correct salaries for employees not only helps to hire good employees, but it will also help you retain employees too. A good place to start is to meet with others in your industry. Inquiring about their pay guidelines, benefits, and employee turnover rate will give you good ideas about guidelines for your business.
Below are 5 steps to consider when setting guidelines for your business.
- Establish the amount of salaries you can afford.
Just like all other business expenses, salaries are also considered an expense. You will need to figure out how the amount of salaries will affect your cash flow and budget by developing a 12-month profitability and cash forecast. Then enter the high end of the annual salary range you’re considering. The result will tell you if the cost can be absorbed by your business. You must also take into consideration any increases in benefits, especially healthcare costs. Once you have created a budget you will be able to assign a payroll spending plan.
- Know and understand the laws.
Minimum requirements are set by the federal government. For example the minimum wage, overtime rules, and record-keeping rules. Note: Many state and local governments have their own rules. Be sure to do the research in your state for wage requirements and any rules that may apply depending on the number of employees at your business.
- Determine and apply value ranges.
You might consider using recruiters and websites to help determine the correct range of salaries. “Value” is key when determining the amount of the perfect salary to fit your budget. You should define the range of value for the job and apply the valuation to a current employee’s performance in the defined pay range. You should also consider the size of your business, the competitiveness of the job market, and your location.
- Job descriptions: review and update.
Review your key jobs and update the description appropriately. If you have any new positions be sure the tasks and responsibilities are written exactly as you want them for each job. What kind of employee do you think will perform the job responsibilities successfully? It will be easier to build a detailed job description and specific salary range when you have a clear picture of the employee you’re looking to hire.
- Company benefits.
Offering a great benefits package and a competitive salary can be very powerful tools. Be sure to convey their value to any prospective or current employees. This will also help with the retention of your employees. Health and dental insurance are #1 in importance, though the flexibility of the work schedule is also very important. Before accepting a job, many potential employees also take into consideration the flexibility in hours, vacation time, or working remotely from home.
At Summit CPA we offer multiple resources to assist and help your business grow. If you’re ready to get an edge on your competitors? Contact our office at (866) 497-9761 to schedule an appointment with our advisors.