By Chris Freeburn

Setting your employees' salaries can be a challenging task for first time employers, or even established employers who are recruiting for a newly created position or trying to keep the employees they already have. Salaries that are too low will fail to attract new qualified candidates, and may cause current employees to begin to look to your competitors. Conversely, salaries that are too high will put a strain on the business's budget and may disgruntle other employees, if they are not distributed fairly.



Figure out who's doing what
Before you start trying to set the right salary, it's a good idea to define the job. "Employees who work for small business often wear many hats," says Ann Swigart, president of Small Business Recruiting Solutions. "And jobs often change over time, with people taking on new responsibilities or moving into new roles altogether." The person you hired to keep the office's computers running may also be handling data entry and answering the company's telephones as well. Figuring out exactly what each person does, will help you decide how much they should be paid and how their salary should be adjusted over succeeding years as their workload increases or remains the same.

Research, research, research
"Generally, the best way to figure out the right salary for a given job is to find out what other companies in your area are paying for the same work," says Swigart. One useful method of finding out what your competitors are paying their employees is to network with managers or owners of similar businesses in your area and learn what salaries they set for positions like the ones in your company. Consulting a local accountant can also be helpful since he or she probably has a grasp on the typical salary range for most jobs in your community. Regional trade associations usually publish surveys of salaries for various positions within their fields, though salary levels can sometimes vary significantly between even neighboring communities. The U.S. Bureau of Labor Statistics ( publishes a nationwide survey broken down by region and occupation, but the data is often dated. Consulting the employment listings in your local newspaper or employment office is also a good idea since many such listings will offer a suggested salary, providing a yardstick with which to assess your contemplated offer.

Setting the salary for a new hire
When looking at add a new employee, you should set a potential salary range with a defined floor and ceiling, rather than simply a specific number. This gives you room to negotiate with prospective employees, permitting you to adjust your final salary offer based on the particular applicant's experience and skills.


Given the time constraints and complexities of modern life, potential applicants may be interested in more than just a straight salary quote. You should emphasize any benefits that may accompany a position in addition to the base salary. Perks like flexible work hours, health insurance, bonuses, childcare, compensation for transportation costs and retirement plans, if available, should be mentioned in tandem with any proposed salary. It is also advisable to budget ahead when setting a new employee's salary. Remember to include room for future raises in the budget.

Finally, it's a good idea to spell out all the details of a new employee's salary and perks in an offer letter, which should state the employee's start date, salary, benefits, bonuses and vacation time. Putting these elements into writing can prevent future misunderstandings and disputes between you and your new employee.


Chris Freeburn is an associate writer/editor for Priority magazine.

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