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How to Determine Employee Pay

By Townes Haas   |    May 26, 2015   |    9:03 AM

Determining Fair Pay to Attract Talented Employees

Congratulations! You’re at the point in your business lifecycle where you can think about hiring additional help to take your business ideas to the next level. You’ll want to attract talented employees so that you can build the most effective team possible. But, how do you determine how to compensate them? There are a variety of factors to consider, like providing competitive salary packages that attract the top talent (without overpaying), and of course, how to compensate yourself. Continue reading to learn more about deciding how much to pay your employees.

First, look at your business finances

Employee pay is one of many business investments that you’ll make, and you should treat it as an investment, because you’ll be wanting a return on that money. Think about what the employee is worth to you and your business and determine your salary “ceiling” that you can’t, or won’t, go above.

This is easy for certain employees, like sales team members, because they’re actively bringing in new business. It does get trickier with other potential employees, though.

The value of support staff

It’s relatively simple to determine the value of employees in positions like sales and business development, because they’re bringing in money. But when it comes to support staff think about their salaries in terms of time and money saved.

For example, will having a receptionist free up your time, so that you can bring in more new business? Can this person support other employees, giving them more time to complete high-level tasks?

Research similar salaries online

Thanks to the Internet you don’t have to guesstimate employee salaries for positions similar to the job you need to hire for. With your ceiling in mind head over to sites like Salary.com to compare salaries based on position and location.

You’ll come away with a good idea of what your competitors are paying. If you can’t match the numbers you might be able to think of alternative compensation methods that could entice job seekers. Telecommuting, more vacation time, a dog friendly office… use your imagination to come up with unique ways to attract top talent.

Ask around your network

You can actually talk to other business owners to get an idea of what they pay their employees. If they’re willing to share that information with you, you could easily come away with some very helpful information. If you haven’t already try joining a business networking group or get involved with your local Chamber of Commerce.

Don’t forget to pay yourself, too

Your employees are important, and you are, too. It’s all too easy for small business owners to neglect their own pay, thinking that the more money the business has the better off it will be. But, if you’re in a position to pay employees, it’s likely time to pay yourself.

How you pay yourself will depend on how you’ve setup your business. There are different rules for Corporations and S Corporations, for example. You’ll want to follow the same guidelines you used for determining employee pay, including researching related salaries for positions similar to your own. Your CPA is another helpful tool, and they can help you make sense of the numbers.


If you still feel like you need more information about determining employee pay, this article from Entrepreneur is an excellent, comprehensive resource.