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Lead Your Team Managing

Are You Paying Your Employees Enough?

Are You Paying Your Employees Enough?
Credit: Melpomene/Shutterstock

As your business grows and begins to hire employees, it's important to properly compensate your new and existing team members. While this seems easy enough, you need to consider several factors when determining salaries.

To get a better understanding of best compensation practices, we spoke with HR professionals and hiring managers. They shared four key tips for determining pay structure within your organization.

When making salary decisions, it's important to get outside input. Tim Tolan, owner of national recruiting firm The Tolan Group, suggested looking at websites like Salary.com, which can provide your company with detailed insights into how others in the same field and region get paid. Tolan believes a tool like this works best for businesses with more employees, as a mom-and-pop shop might not need such a detailed resource.

Speaking with recruiters is another way to gain insights into salary standards in your industry.    

"I would highly recommend that companies consult the expertise of a recruiter, because we're infinitely involved in the compensation packages of our candidates," said Paul Harris, president of Global Recruiters Network Blackhawk.  

Reaching out to knowledgeable people in the industry or utilizing online resources ensures that you aren't wildly guessing when setting salaries. Paying for a recruiter might not make sense for the smallest of small businesses, but growing businesses can find value in enlisting the help of recruiters.

Additionally, you can turn to other businesses in your area for advice. Harris also recommended speaking to competitors, assuming they're friendly, to receive advice on how they handle salary and how your business can set fair wages.

Bottom line: It's not a bad idea to seek out the advice of several different sources when determining salary.

Looking back at salaries in your company's history can shed light on what's a fair salary for certain positions. Have you seen high turnover in any positions? This may signal a need to look at that job's compensation.

It may also signal a need to boost employee perks like paid vacation rather than increasing monetary compensation. While it's not included in their salaries, employees who go above and beyond their job duties can go out for a nice dinner with family or friends, and the company handles the bill. Small gestures like these build the relationship between managers and employees, which in turn improves job satisfaction and retention.

"You can offer additional PTO days," Tolan said. "Say, 'You did a great job. I want you to take next Friday off. It's on me.' That always builds a good culture … If we have someone that really, really, really does a great job, and we just had one last week, we'll give a night out on the town."

If you're a startup without a salary history, try enlisting the help of a mentor who's willing to share how they determine salary as a business owner.   

Speaking with your staff stands as the most effective way to ensure fair compensation. Looking through every salary website and company database doesn't do you any good if you aren't speaking to your employees. What do your employees want to be paid? What forms of compensation other than money do they desire?

By talking to employees, you begin to understand their perspective and can balance that with the budgetary restrictions of the company. You may find that employees don't want higher compensation but more recognition for their good work. To get to the bottom of people's desires, it's vital to speak with them frequently.

Some employees won't immediately feel comfortable discussing salary with their boss. But if you speak to them enough and build a relationship, eventually those walls will break down and you'll be able to lead transparent conversations regarding salary.

"I just think it's a matter of building trust," said Bob Cerone, CEO of Cognos HR. "It's a matter of not just doing it once and then coming back a year later or two years later and doing it again; there's got to be some continuity." 

Regardless of your findings, understanding how to pay employees fairly becomes significantly easier when you speak to yours.   

The law plays a role in how you pay employees. If your business has interns or part-time workers receiving minimum wage, it's critical to follow the minimum wage laws for your state. If your business grows to the point where it expands into a new state, this may lead to minimum wage workers receiving different hourly wages depending on where they're based. You want to stay up to date on compensation regulations to avoid potential legal consequences.   

Additionally, there are laws in certain states that prevent employers from asking candidates for a salary history. With laws like this making it more difficult – or illegal, depending on the state – to ask what candidates currently make, it's important to steer interviews away from those types of questions. You don't want to be on the wrong side of a lawsuit because you weren't aware of legislation in your state.

By reading up on best salary practices and legal guidelines, you'll put yourself in a position to avoid legal trouble. If you're unsure whether your salary practices are legal, consider speaking with a lawyer or HR professional.

Finding the right amount to pay employees is never easy, especially for new business owners, but having honest conversations with employees and outside resources makes the process much less burdensome.

Bennett Conlin

Bennett is a B2B editorial assistant based in New York City. He graduated from James Madison University in 2018 with a degree in business management. During his time in Harrisonburg he worked extensively with The Breeze, JMU’s student-run newspaper. Bennett also worked at the Shenandoah Valley SBDC, where he helped small businesses with a variety of needs ranging from social media marketing to business plan writing.