How To Set Wages to Reduce Turnover and Optimize Competitiveness
If you were getting paid what you’re really worth, would your paycheck go up, or down?
Don’t worry, I won’t make you answer that question, but it does put into focus an important issue: How to determine the pay rate for a position in your small business.
A recent PNC Economic Outlook Survey found that two out of five small and medium-sized businesses plan to hike wages in the next six months. That’s the most since back in 2008. And on top of that, nearly 60 percent said they would boost pay by 3 percent or more, while the national average is at around 2 percent. The 3 percent figure is also above the Federal Reserve’s inflation trigger.
Perhaps the higher than average number is due to postponing pay hikes in recent years, but whatever the reason, we get back to the central question of how to determine salaries and wages.
Get the job description written
With any question regarding a position in your business, the place to start is with a good job description. Sometimes small businesses end up creating “hybrid” positions that combine skills from various professions. For example, an office aide might be required to do a little work with graphics on a regular basis. You need to put this in your job description so you can get the right person and also set the right salary.
There’s an excellent online resource today at Salary.com that allows you to input a job title and see a salary range for your area. It’s a great starting point, however don’t just jot down the figure and call it a day. If you have a job that requires additional skills you may need to think it out more. Also, you want to check other sources to confirm what you learn from the online source.
Check other sources
To fine tune the range for your new hire, look at local job listings, online and in print. Also consult trade organizations in your area. They often have “help wanted” listings that may give you salary range information. The Bureau of Labor Statistics offers a wide range of data available online, including results from its national compensation survey. You can find some job categories in your area by searching its database.
Further, when you’re setting the salary range for a new employee, it’s a good idea to double check pay rates for your current crew. Use Salary.com and verify that you’re within an acceptable range for each position. Bringing in someone who is being properly paid to match his or her job requirements – if coworkers are over or under their expected ranges – may create a toxic workplace.
With a solid job description and a thorough survey of the labor market and salary ranges in your area, you can plug new employees into your operation and know that you are paying them fairly. This will reduce turnover and help keep you competitive.
