When you make the transition from a sole proprietorship into a business with employees, one of the first things you need to figure out is how much you'll pay each of those employees. As you develop new positions and start recruiting, there are a few things you can do to help you build a solid compensation structure. Here are some steps to narrow down the best pay rate for each role.
Start with a Clear Definition of Responsibilities
Before you can determine how much to pay for a position, you need to clearly understand that role and its responsibilities. Create a document that defines the purpose of the job, the employee's primary role and responsibilities, and the education or experience needed for a suitable candidate.
Make sure that the job description is clear. Job titles aren't always the best thing to use for sole identification of a job because the same job title could have different interpretations throughout the industry. Instead, use a combination of both the title and a complete description to define the role.
Determine the Job's Market Rate
Evaluating the market rate of a job requires evaluation of the current industry trends. You can do the research yourself by investing in salary surveys. Just make sure you don't rely on a single survey; buy several so you can compare rates. Look for data about companies in the same industry as well as general positions of the same responsibility. Focus geographically as close to your area as possible so that you have an accurate and reasonable assessment of what candidates could earn in your area.
Make sure you look at total compensation, not just base salary. Most positions will include benefits such as insurance, club memberships, discounts, retirement contributions, and more. These all contribute to the value of the compensation package. If you're not sure what to include, a compensation consultant can help you with this step.
Consider the Value of the Role Within Your Company
In addition to the industry standards and the traditional rates for the position, you'll also want to think about the value the job holds to your company. Jobs that have a significant effect on your daily operations should have a higher salary because of that value to the business. Think about how the company's operations would be without someone in that role and how much education is required to work in that position.
If you aren't confident in your ability to be impartial and logical about this assessment, the best thing you can do is reach out to a compensation consultant such as Fox Lawson & Associates, A Division of Gallagher Benefit Services Inc. that can help you through the process.