As a business owner, managing your expenses is one of the most critical factors. It is a complex undertaking, as you have to balance various components to run your finances smoothly. Salaries form a significant proportion of your monthly and annual expenses, and as such, you need to be careful. Very low wages and you will lose your talented workers and very high salaries, and you will hurt your business. So, how do you structure your salaries competitively without hurting your finances?
1. Research Wages
Research is an essential aspect in determining the salary you will pay to your employees. You need to research salaries with respect to positions so that you can have a valid reference point. After researching, you need to get the median of all the wages in the industry. That is what you will pay your employees. There is no doubt that you will be offering a competitive salary in the industry because you are in the middle of what the market is offering.
2. Business Income
Before deciding the amount of money you will pay to your employees; you need to analyze the finances of your business. The amount of money that your business generates should help you to form the baseline and the maximum amounts that you can pay. Using business income to determine your salary scale helps you in ensuring that you have a sustainable salary that your business can afford without experiencing financial distress.
3. Offer Continuous Improvement
One of the things you have to know is that salary is one of the employees motivating factors. In as much as your employees share your goals, they are working for money. Therefore, you need to have a reasonable salary and promise to improve depending on performance, years of service, and business growth. Make it clear that salary improvement is conditional so that employees don’t build a feeling that you owe them after a few years of service.
4. Hire a Salary Consultant
In most cases, you will need to hire a consultant for any type of salary consulting services so that you can get reliable information from the industry. Mastering issues to do with salaries and wages is a complicated aspect. The issue has become worse with the introduction of minimum wage and hourly wages. Due to the number of rules governing this sector, you might find yourself on the wrong side of the law. However, with a consultant, everything will be sorted professionally.
5. Determine Salary Range
Your salary consulting expert can help you to come up with a salary range that is consistent with the industry and also your finances. A salary range provides restrictions and draws boundaries on what is reasonable for each position and what your business cannot afford. Your employees should fit in your salary range, and if they don’t see it fit, you can happily replace them without guilt.
Before deciding on your salary structure, you should get enough information on the industry through benchmarking. Always consider paying your employees competitively. However, protecting your business should be the priority. A considerable number of startup companies have failed due to unsustainable salary structures.