5 Things to Consider When Setting Employee Compensation Levels
Unless you work for an organization that sets immovable pay grades, deciding how much a prospective employee should be paid can be one of your tougher management challenges. You want the best candidate you can find, and you want to attract that individual with a number that will get their attention.
Fortunately – and unfortunately – you’ll most likely be pricing that new position based on what’s available in the budget. That take some of the pressure off of you, but it also ties your hands. So the first thing you need to do is find out what your financial restrictions are. How much can you offer, tops?
You’ll need to find the sweet spot – the salary that will appeal to someone with your desired qualifications, but which leaves some room for negotiation. Here are some things for you to ponder while you’re making this decision.
- Assess your actual needs carefully and realistically. Whether your opening is for a top management or an entry-level staff position, you want to hire an applicant who is an ideal fit, and who has demonstrated skills from previous positions. But before you can begin to shape that job and its pay, you need to be very clear on what your company or department needs, and whether you have the budget for it. There’s a big difference between “the best” and “the best you can afford.”
- Be honest with yourself about what you can afford. For any position you’re listing, the requirements for education, experience and other factors should be in keeping with the compensation you’re offering. The described responsibilities of the job should also be carefully balanced against compensation levels and adjusted to match the open position accurately.Write a sample job description and read it. Does the compensation you can offer match the levels of education and job responsibilities you’re requiring? Keep writing until it does. You’ll attract better-qualified applicants and filter out those who aren’t a good match.Don’t use boilerplate descriptions. Be specific. Be truthful.
- Keep in mind that compensation is more than just a paycheck. If you’re looking for a Cadillac applicant, you need to offer Cadillac benefits. Your overall benefits package should be suitable for applicants who meet your high expectations. If you can’t afford the benefits that you think you need to be offering, talk to your financial advisor. There are alternatives.
- Include intangible benefits in job listings. If you’re hoping to interview the very best-qualified and most-motivated applicants for any position, factors other than compensation are important. Advancement opportunities, a welcoming company culture and work/life balance benefits like flexible hours, family-related time off and other perks can make all the difference to the most desirable potential hires. Mention these prominently in your listings.Be creative. Today’s workers are looking for extras more than they were even 20 years ago, when the “big” benefits were more generous – and economically possible. If an applicant is considering two fairly comparable jobs, even a minor difference can tip the scales. You never know what’s going to be important to prospective employees.
- Consider your competition. Spend some time researching what other companies in your market area are offering for similar positions. Your compensation package should compare well with other local employers. If competition for outstanding applicants is fierce in your market, additional stimulants – like hiring bonuses, use of a company car, and a spacious office — may give you an edge over your competitors.
Employees are a cost center for you, but the right ones can have enormous impact on your profits, too. Having highly productive and talented employees at every level directly and positively affects your bottom line.
If you’re new to this game, schedule a meeting with your financial advisor. He or she can help you price positions. Your accounting professional can also look at your overall budget and projected cash flow, and may be able to suggest ways to free up funds for that job that’s going to require a hefty salary.