Paying employees is a sensitive topic because nobody wants to feel like they are getting ripped off. Employees work hard and want to be paid fairly, but it’s up to you to decide how much they get paid.
So how do you determine how much to pay your employees?
Size of Your Company
The answer lies in an assortment of factors. The first thing that comes into play is the size of your company. If you’re just starting out as a small business owner, then you may not have the revenue to pay more than minimum wage. However, if you are a large corporation, then you have more flexibility with wages and salaries. So the size of your company is the most important thing to consider when determining what to pay employees.
Years You’ve Been in Business
One of the next things that you need to consider when establishing employee salaries is years in business. If you’ve been around for a long time, this indicates stability and experience which can give your business some leverage for higher salaries. On the other hand, if you’re a relatively new startup, then people might not be as willing to accept lower salaries because there’s less financial security for them at such a young company.
Your Revenue Stream
Another factor that affects employee salaries is revenue generation. The more profitable your business is, the more money you have to distribute among employees — and the higher their salaries will be.
An employee’s skills and years of experience. As an employee gains skills and experience, his or her salary should rise accordingly. In addition, if an employee works harder or puts in longer hours than others, that may merit an increase in salary as well.
Fair Market Value
The main rule of thumb is to pay employees at least fair market value for their salary. That means paying them what they are worth to you, based on their skills and contributions. That value should be higher than what they would earn elsewhere in the same market or industry.
Hiring the right person can be a game-changer for a small business. The trick is figuring out what they should make in the first place.