When you’re hiring your first employee, you might not know how much you should pay them. Deciding how much to pay your employees is a balancing act – you want to offer enough to attract top talent, but you don’t want to pay more than the job is worth to you. Like any other business expense, you want to get a good return on the investment you’re making in your new employee.
The amount you pay your employees will impact your bottom line, your ability to attract talent, and your reputation. Keep the following things in mind when choosing a new worker’s pay rate.
Know What You’re Hiring For
Before you set a salary or hourly rate for a new employee, know what role you expect them to play in your company. Start by writing a detailed job description to outline precisely what you expect your new employee to do.
Set a Range
Set a pay range before you start the hiring process, so you know the most you’re willing to pay and the least you can pay. Look at what the job is worth to you and what the market demands.
Decide the most you’re willing to pay
Ask yourself how much value the new position will add to your company. Your answer will be the most you’re willing to pay your new employee.
If you’re hiring a salesperson, the answer is easy. A salesperson brings in revenue, so make sure they’re bringing in enough income to at least cover their salary.
If you’re hiring administrative or support staff, it might be a little harder to answer the question, so the question changes a little bit. It’s no longer “How much value will my new employee add to my company?” Instead ask, “How much money can my new employee save me?”
Decide the least you can pay
Market rates set your candidates’ expectations. They’ll expect you to pay at least the average market salary unless you can also provide excellent benefits.
You can find market rates by using sites like Salary.com or PayScale, which will allow you to search by job title and location. Being able to search by location is especially important because the market rate for a position in California may be vastly different than in Georgia. In Georgia, the average salary for a job in Atlanta is going to be different than in Evans.
By determining the average rate in your area, you’ll have a better idea of what potential candidates expect you to offer.
Plan for the future
When you’re hiring a new employee, make sure to plan for the future. Ideally, you’re hiring someone who will stick with your company long-term, so plan for their benefits, raises, and bonuses to make sure everything will fit in your budget. Read also: How to Set a Budget for Your Small Business