Complying with wage and salary law and doing payroll are vital components in the process of paying your employees. First, however, you must decide what amount to pay them. Pay packages have so few rules. They go up and down depending on geography, industry conventions, seniority and the job market, as well as a candidate’s background.
The salary you set must be high enough to attract top applicants but not so high that it eats into your profits or survival. Companies that underestimate the importance of managing wages and salaries risk high turnover and low employee morale, productivity and retention.
Deciding how much to pay an employee is an issue that just about every employer struggles with at one time or another. It’s often a fine line between paying enough to attract (and retain) the best employees without breaking the bank.
It can be particularly tough for small business owners who are quite often operating on tight budgets. So how do you determine what you should pay an employee? You should first make sure that you are in compliance with the country?s Fair wages and salaries commission?s laws. You should then be sure to offer a competitive wage.
The best way to find out what a competitive wage is, is to find out what others are paying for the same type of work by obtaining salary data. Getting salary data can be used to determine what competitive pay is for the work you want done. There are also several other reasons you will want to keep on top of market rates:
? Inflation Inflation causes the buying power of your employees’ salary to decrease since many employers adjust for inflation each year. Maintaining competitive pay may, in fact, require you to adjust every 12 to 18 months.
? Mobility of Personnel As the educational level of your employees rises, more will change jobs and change employers more frequently. At the lower-end of the pay scale, turnover can be high and makes it necessary to keep on top of who’s getting paid what in the field where your employees work.
? Credibility Without wage and salary data, it’s impossible to know that you offer pay that is fair in relation to other employers. If your employees begin to feel underpaid, you won’t be able to tell them, with confidence, that they’re not.
? Threat of unionisation As your business grows and you gain more employees, you need to be aware that some unions have targetted small businesses for organisation activity. If your pay is highly competitive, you reduce the likelihood that your workers will consider joining a union.
How to Figure Out How Much a Job is Worth
Here are some steps to guide you on how much to pay. Study the difference between paid overtime and unpaid overtime classification. The National Labour Act codifies overtime regulations for paid overtime and unpaid overtime workers. Employees classified as unpaid overtime are not entitled to overtime pay. Paid overtime employees are entitled to overtime pay. ??A worker may be required to work beyond the fixed hours of work without additional pay in certain exceptional circumstances, including an accident threatening human lives or the very existence of the undertaking.?
Use the proper terms to distinguish between wages and salaries. It?s perfectly acceptable to use the terms interchangeably; however, in some work environments, the terms ?wages? and ?salaries? refer to two different forms of employee compensation. The term ?wages? typically refers to hourly compensation for unpaid overtime employees. The term ?salaries? refers to weekly, bi-weekly, monthly or annual compensation paid mainly to paid overtime employees.
Review your own pay practices Don’t wait until you find a candidate to come up with an offer. Do some homework beforehand. The biggest mistake is to react to what an individual wants before you know what you should be paying. Instead, get a handle on your past practices and precedents. Assuming you don’t run afoul of employment, the decision about salary comes down to assessing how you value the job and what your company can afford. You also need to keep the salary of new hires in line with what you pay current staffs.
Go through a budget process Check how much you spent on payroll for the past year or two. Decide how the position you’re filling fits into that overall percentage. You want to balance company payroll against the marketplace. Define the job You can’t research a job’s going rate unless you compare apples to apples: i.e. you need a clear-cut job description. The worst thing you can do is to compare job titles because they can be totally out of whack with salaries. Write a job description and then use that as your point of comparison for the marketplace. Be aware that every small business does a dozen different things, but there are always key responsibilities.
Again, review your overall wage and salary structure for fair and competitive pay practices. Employees in similar job groups and occupations and employees performing comparable work are entitled to be paid congruent with their skills and qualifications. Fair pay means your organisation achieves internal equity where compensation is concerned; competitive pay refers to external equity, meaning your compensation practices are based on profitability, industry practices and employment trends. Track the competition Uncovering the competitive rate for a job takes detective work.
Find out what competitors or similar-size companies are paying for the job you have in mind. Set the salary range Once you have an idea of the competitive rate, experts suggest you set parameters for the job. That will keep you focused. But everyone differs about the best time to mention the salary range to the candidate. Some recommend asking a candidate how much he/she earned at the last job as a way to begin. Others suggest mentioning the salary range as a screening device, during the first interview.
Still others think salary should be the last thing mentioned because you’re better-off getting to know the candidate’s qualifications and skills first. With a good fit, money might not matter so much. The bottom line is it depends on what feels right for you. Package pays and plus sides Jobs are rarely only about money, although that may be what applicants mention first. These days, benefits and “quality of life” perks go a long way toward attracting talent and enriching compensation offers. With employee contributions to health-care and employer funding for retirement, it’s less expensive to outbid competitors.
Don’t overlook flexitime and other such options. Budget for the future However you structure the salary, don’t forget to think ahead. You need to remember to leave room for raises and think about six months or a year down the road. If your candidate is hired at the top of your pay scale, you’ll have nowhere to go but off the charts. When you’re ready, put the offer in writing in an offer letter.
Describe all the details and terms, including start date, pay package, benefits, leave, and so on. You might also include the special perks, like flexitime. That way, you avoid confusion or disagreements later on.
How to Get Access to Salary Data
Small businesses in particular may not have a great deal of time to hire someone to help out, so getting salary information isn’t something you’ll be able to spend days and weeks doing. There are a number of sources where you can go for quick data:
? the classified ads
? networking
? public information
Using the Want Ads for Salary Data
The quickest and easiest way to find out what the going rate is for a particular kind of work is to see what others are offering; to find out in a hurry, check the classified ads in the newspapers or online. See if you can find similar jobs or positions that entail the same kinds of work.
Many classified ads will include an approximate pay range. If you’re lucky, they’ll state the exact starting salary. If you find that not enough of the ads include a pay range, you can always contact the employer and ask! Be sure to note things like the duties that the job requires, the geographical area that the job is in, and any benefits that may be offered. If the job’s duties are the same as the one you will be offering, that’s helpful.
If your job’s more or less demanding, plan on adjusting pay accordingly. If the jobs are in your geographical area, you’ll have a good basis for comparison. If they are not, then they may not provide as accurate a comparison. The best information will be from jobs in your immediate area because those are the strongest competition.
Networking for Salary Data In addition to using the classified ads for salary data, there are some other, more informal ways to get data, too. They tend not to be reflective of an entire industry or area, but they can give you a starting point. If you have a relatively common job-opening, you can always ask:
? other small business owners
? your chamber of commerce
? employment agencies or temporary help agencies
? company and trade associations, including local trade groups that specialise in the applicable industry
? competitors who have a job-opening (you may get the information or you may not; try being creative)
? friends
? suppliers
? job applicants — they may be willing to tell you how much they were paid in their previous positions
? Anyone doing that job — who knows, maybe they can give you some leads on people you can hire!
Public Sources for Salary Data
The Pay Policy, Analysis and Research Directorate of the Fair Wages and Salaries Commission undertaking Compensation surveys with regard to Job Classifications, Benefits and Salaries can be a source of information in the provision of salary data.
The advantage of using their info is that they may reflect data — some in geographical areas — so one can get an idea of what employers in that area are paying for a specific job. Others like the National Labour Commission and the Statistical Service may have information about benefits and other statistical information related to employment.
Finally, if based on your research you find that you can’t possibly even come close to paying a competitive wage without destroying your bottom line, you may want to think about postponing your decision to hire an employee and come up with some creative solutions to your staffing needs, such as hiring family or creating an internship position. Thank you, and please consult us; we are here to help you.
By Prince Etornam William Attipoe
PR & Customer Service Expert
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