The old idiom “you get what you pay for” couldn’t be more spot-on when it comes to determining wages for employees. While we recognize employees as people, there’s no denying that the cost of an employee is still a line item in a budget report. So, how does a company negotiate to get the highest quality for quantity?
Quality employees value their time, recognize their worth and want to work for a company that does the same. An appropriate salary for a position will appeal to a competitive pool of applicants. From the beginning, you want to attract the best talent., but given a limited amount of talent in the job market, it’s crucial that your company sets itself apart.
Paying a high salary creates a positive reputation for employer branding, two-fold.
- It attracts talented job seekers.
- Clients know your team is the best in the industry.
When it comes to costs, the most important factor is retention. Job posting, interviewing, onboarding, training, and trial periods all cost money. If you hire qualified people but don’t pay them enough, they leave. You continue spending money to find a person that isn’t the best with the hopes they might stick around. Meanwhile, the rest of your team is left picking up the slack. Before you know it, you’ve lost talent, morale is down and the company continues to spend even more. All of those additional resources could have been allocated to posting a higher salary, to begin with. You could have landed and kept the talent from the beginning, saving a lot of time and energy.
New and talented employees are an investment. The return for a qualified employee could have significant results for a company. Employees will:
- Nurture customer and client relationships.
- Contribute to profit growth.
- Be engaged and inspired to bring in new ideas.
- Feel respected and reflect this notion back to the team.
Define the position to identify proper salary
You understand why an appropriate salary is necessary, but how does one determine the right amount? First, take the time to really understand the position you are hiring. We don’t blindly put a cost on something before understanding the time and materials involved, and, it’s the same with wages.
- Assess the roles and responsibilities.
Consider factors such as task complexity, workload, and even how independent vs interdependent this role is compared with the entire staff.
- Determine the seniority level.
Is this an entry-level position, or are you trying to attract senior players from the industry?
- Understand where the role fits in the staffing structure.
Who reports to the position? Who does this person report to? Compare the salaries above and below this position.
- What experience, certifications and education are required?
This can help determine an industry-standard salary base. Use third-party sources like Bureau of Labor Statistics, Glassdoor and Payscale to identify the average & median salaries for similar positions in your area. Consider hiring folks who are already certified versus hiring someone without and offering educational opportunities through the company.
From negotiations to pay increases, know your numbers.
Along with role assessment, you should have a clear comprehension of your salary range. Get to know the numbers. There should be a definitive minimum base amount as well as a cap amount. If possible, project what this salary may be over the next few years. A curious candidate will ask these questions; make sure you have the answers.
Having your range sets a parameter for the most you can afford and prepares you for the least a candidate will accept. Be flexible. Don’t lowball anyone but be cautious with your offer. It’s better to have some wiggle room than to give a max offer and lose a qualified candidate because you can’t match their counter offer.
Having a salary increase path laid out in an offer will empower employees and give them the confidence to succeed. It lets them know you have put thought into their value because you care. Transparency and set expectations can be key to retention. Consider your company’s policies:
- Timely reviews
Whether quarterly or annually, reviews should be marked on the calendar and given priority. They let your employees know where they can improve or what you need to provide before it’s too late.
- Pay increase schedule
Clearly state when raises are considered, and how much the limit is whether this is a dollar amount or percentage. Employees may not be productive if they are looking for higher-paying jobs. If they know they are sure to earn more, they will work harder to prove they deserve when the time comes.
First 30, 60, 90 days. Define any trial periods before PTO and sick days kick in. This gives you some insurance that a new employee is serious.
Offer performance incentives that are tied to achievable goals.
Remember that when you are looking for the best of the best, those future employees know their worth. The higher you pay, the higher the bar is set. Offering high salaries creates a strong work performance precedent from the beginning. If it’s not you who will pay them what they are worth, someone else will. Don’t lose out because you were pinchin’ pennies. It will end up costing you more in the end.