For many businesses, employee salaries can be one of the largest operating costs. Business owners may spend between 40 to 80 percent of gross revenues on employee salaries and benefits.
I know a lot about this subject. I’m a recovered ex-Advertising Executive – once a Senior Vice President Creative Director in top New York agencies. I’m now an online entrepreneur with a range of bestselling books and video courses. I love to help entrepreneurs and businesses of all sizes with their growth. I offer 1-on-1 marketing consulting – here.
In this article I will be answering the question: How much should I pay my employees?
This guide covers the key things to understand.
Business owners or hiring managers often place too little effort into creating a precise job description.
Job descriptions will often outline a list of requirements that is almost impossible for any single person to have. In other cases, job descriptions are far too general for a job seeker to understand what the role actually entails.
Placing time and effort into writing a precise and well-considered job description is worth the effort. You will have a far better understanding of what skills the position really requires and how to decide on the best candidate. And candidates will know if your job is right for them.
Salary data is abundant on the internet. Using this data is critical to understanding how to set wages.
If you have written a clear job description, you can use the keywords from the job description to find recent pay rates for your industry and region.
When researching employee pay, look for low, average, and high salaries for positions similar to the one you are looking to fill. Knowing the range of recent salaries for similar positions in your region allows several benefits.
Understanding the range of employee wages offered to new hires in your area allows you to negotiate best with potential employees.
By knowing the salary range, usually based on experience, you can select candidates that have experience commensurate with what you can afford to pay.
As any business owner understands, cash compensation is only part of the total salary paid to employees.
After all, the U.S. Small Business Association estimates that an employee costs 1.25 to 1.4 times their salary. Managing small business payrolls are critical for business success.
Benefits such as health insurance, life insurance, or pension plans are important aspects of employee compensation. Health savings plans are also critical benefits.
Often, benefits plans are not taxable and offer tax enhancements for employees over equally valued cash compensation. Benefits plans can be a win/win for both employees and companies.
Additional employee costs do not only come in the form of benefits plans. A smaller portion comes in the form of costs such as background checks, drug testing, initial training, and uniforms.
Optimize these costs where possible.
For example, one simple approach to reduce the cost of human resource labor is to use the best check stubs maker. Small cost improvements to reduce the costs associated with employees can go a long way.
It might go without saying, but understanding the value of an employee is a key business management skill.
By consistently reading books, blogs, and other materials to improve all facets of your management skills, you can intuitively price the value your employees bring and the question “how much should I pay my employees?”.
Need more business and workplace advice? I love to help entrepreneurs and businesses of all sizes with their growth. I offer 1-on-1 marketing consulting – here.