Salaries: Knowing what to Pay

A Good Starting Point

When working as a small business, sometimes as a sole employee and the time comes to take on staff as business and workload increases. But how do you know what to pay your potential to employees? How do you stay competitive?

A good starting point.

Setting a salary at the right figure is something that needs to be thought through. It is important to bear in mind the current national minimum wage, and working time regulations. If you set a positions salary too low, you could end up with an empty reception room as no–one with the appropriate skills and experience would want to work for you. On the other hand, if you set the figure too high, you could see your new employee’s wages reducing your profit margin.

There are a few things that you may have to take into consideration.

  • An acceptable salary will vary in different parts of the country. The dearest places would be the cities, London for example.
  • If there’s a skills shortage in your sector, that will affect what you should expect to pay.
  • Market conditions play an important part also. For example, if the value of houses and energy costs are going up and you are not mirroring these in your calculations, then you could see your prospective candidates going elsewhere.

The easiest way is to look at the competitors. Advertisement in the form of Agencies, local job centres, magazines and online job boards like Monster, will give a scope indication of what the going rates are for your position.

A lot of the time, simple word–of–mouth is just as effective at determining the star and end figure in which you can manoeuvre. There are plenty of websites out there, in which you can input information in the job fields and see what kind of salaries that they are showing. Examples include and

The right employee for you.

The company budget for salaries will ultimately determine what the salary is for a particular position, so the obvious first point would be “how much is this person worth to me?” Knowing how much you are willing to pay for a good employee in that position can help you determine what your range is going to be for salary negotiations.

For example, hiring someone that will generate income for your business (sales), or someone to do/aid with your job, so you can concentrate on increasing your income, is more likely to require a higher salary than a secretary for example.

When considering how much to pay people who are administrators or work in support, think about how much you would have to pay if they did not actually work for you, like an agency position or even outsourcing the work. This should all help you determine what a competitive salary would be. Think about the value of your IT support person, your quality control analyst, or your administrative secretary.

If you have a business where you already have employees, it is also best to consider that you are not just offering a competitive salary to potential employees, but also to the employees that you already have. Your current employees are valuable assets to your company and they are already established with you and know what they are doing. Don’t force them to look for new jobs because they are underpaid with too few benefits.

Controlling your expenditure.

Starting salaries are a good way of testing the water, not only regarding salaries, but also the level of competency with your new employees.

At interview stages, you can indicate to recruits that whatever you offer is just a starting salary and subject to change later on. Most companies and large organisations will have a probationary period and if the recruit passes that, there could be an increase in salary. The initial base salary might be low, but if you tell employees what they can expect to earn in 3 months or in a year’s time, pending performance reviews, it’s good for their performance and morale.

Performance Pay: If you cannot afford to pay an annual lucrative salary, you may consider incentives like pay related increases and bonuses by accurately appraising staff performances. Target driven pay reviews are not only applicable of sales teams, but also small businesses.

Perks of the job

If you do not have the resources to match what other employers are paying, then there are other options which can be looked at. Salaries are not the only thing that employees are motivated by, and sometimes it is all about the “perks of the job”. Offering other kinds of incentives is a good way to offset what you cannot match in salary expectations

  • Holidays are one of the main deal clinchers when employees are applying for positions. Rather than offering more money, you could balance it off with using holidays creatively, as part of the employee’s company benefits. Another example could be agreeing to extra unpaid leave may provide a trade-off if you cannot afford the going salary expectations.
  • Flexi–time working can be a powerful attraction for potential recruits, especially to people that have to travel to get to work, parents etc.
  • Job content and fulfillment are what many people want most from their work. The day you find a job you like, is the last day you ever do any work, because it never seems like work. Most employees want to be motivated and challenged in their jobs, but not stressed. Use appraisals and performance reviews to fine–tune the role and get the best out of the person. The feeling of doing something worthwhile, for a worthwhile organisation, is a strong motivator for many people.
  • Personal Developement Plans and in–house training are particularly attractive to young, ambitious employees. Experience in a new role enhances a person’s CV and earning potential. Training makes the person more valuable to you, but also to any other employer for the future.

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