As a small business owner, one of your jobs is to set the salary for job openings. This is one of the most important factors for a job seeker so having an attractive salary or salary range will better attract potential employees. Many things go into deciding on a salary range: your business’s philosophy, availability of funds, and where you see your small business in relation to competitors, among many other varying factors. Reflect on your small business’s philosophy, goals, and current state to come up with a job offer that shines. Read on for this month’s employer HR tips to discover specific ways to reach the best salary ranges for your small business.
Determine Job Roles’ Importance
This is where a well-written job description comes into play. Once you have detailed job descriptions for each open position, rank or sort them by importance. Your ranking should be based on which job role takes on the most important tasks to contribute to the success of your small business. Jobs that include more important tasks go higher in the rankings and get paid more than job roles with less important tasks. Once you have formed this hierarchy, you should have an idea of where salary ranges and job roles would equate.
Do your research
When determining where your small business will fall compared to others, do some research. The Bureau of Labor Statistics has a national database of salaries and other important surveyed facts for each major occupational group. This will give you a good baseline of the national median salary for the position you are looking to occupy. However, as a small business owner, keep in mind many statistics are based on large businesses. What works for big businesses and how they pay their employees may not garner the same results when replicated on a small business. Some of the best resources to use are salary.com and PayScale.com. These sites allow you to search for salary data relevant to your particular location. For example, the average salary for a Human Resources Generalist in Virginia Beach is much lower than in Washington DC. Therefore, use the local, less metropolitan cities as a guide and make sure you’re offering salaries that you can afford while remaining competitive for your location.
Put it in a formula
Once you’ve determined the median salary for the jobs you want to hire for, use a formula to calculate a specific salary range for each job or rank. Generally, formulas are based on a 30 or 40 percent range.
30 percent range:
Maximum = Midpoint x 1.15 Minimum = Midpoint x 0.85
40 percent range:
Maximum = Midpoint x 1.20 Minimum = Midpoint x 0.80
Higher ranked jobs, such as management and executive positions, should have a 40 percent salary range to account for variance in education and years of experience. Lower ranked jobs should receive a narrower salary range of 30 percent range due to more entry-level and non-essential jobs falling in that rank. It is up to you as the owner of your small business to determine the amount of salary ranges and how to base them accordingly.
Keep it in budget
Looking at your budget is one of the most important factors when deciding how much to pay someone. As a small business, you may not yet have the funds to be offering large salaries to potential employees. While you do want to appear as an attractive option to qualified job seekers, be sure you won’t break the bank in the process. Think of benefits and perks to add to the compensation package to entice job candidates if the salary you’re able to offer isn’t very competitive. This may also prove to job hunters that your business cares about the individual and a healthy work-life balance. After all, some people may prefer longer vacation time, flexible hours, and a good benefits package to a hefty salary at a major corporation that will expect them to work long, grueling hours. What you offer will reflect the mission, goals, and philosophy of your company: Hopefully in a way that attracts the right type of employees for your small business.
Looking for ideas beyond salary to attract and keep great employees, check out our article Perks that Work.