There’s no way around this one. If you want to attract the best talent, you’ll have to spend money. When setting salaries for a brand new role, it’s important that business owners shift their thinking from “How can I get the best person for the least amount of money” to “How can I fairly compensate this candidate for their expertise?”
Follow the steps below to determine an employee salary both parties are comfortable with.
Step 1: Write a job description
Writing a concise job description is an important first step before you throw around any numbers. You need to understand the value this role would bring to your company.
Create a title that clearly indicates your desired experience level, outline the main tasks this job entails, and think about how much time will be required for each of those responsibilities.
If you don’t feel confident in your job description, we’ve got you covered.
Then it’s time to move on to the next step.
Step 2: Conduct industry research
Now that you know the nature of the job, it’s time to do some research. You’re looking to understand the industry standard for this type of role. There are a few ways to do this:
Hit the job boards. Check out what other people (including your competitors) are offering.
Buy access to salary surveys. They cost a little more but have verifiable data and a concrete methodology.
Talk to other business owners and recruiters. There’s no substitute for a conversation with people who have been there, done that.
Step 3: Comply with legislation
Before employing anyone full time, you need to understand what’s legally expected of you legislative compliance article. There are rules and regulations that your business will need to comply with, including: minimum wage obligations, frequency and method of payment, mandatory holidays, overtime compensation, vacation pay, and other employee rights. Consult with a legislative compliance expert before you proceed to the next step.
Step 4: Consider your budget
There’s no magic formula for deciding when you’re financially ready to hire a full-time employee, or for what you can afford. Every company is unique. “But there are a few factors to consider,” says Therese Van Es, President of Ladder HR Solutions. “Like the lost opportunity cost.”
The lost opportunity cost, for our purposes, means calculating what you’ll be missing out on if you don’t hire someone for this role. “There are two main reasons people hire a new employee— for their specialized expertise and to save the time currently spent doing the job themselves.” Time that you could put back into growing your business. That’s a significant opportunity. How much money is that worth to you?
After consideration, if the value of the position and your budget don’t align, you’re probably not quite ready to grow in this direction yet. “But there are other options to get the job done!” Van Es hurries to add. “Part-time or contract support is sometimes better because it allows for more flexibility. They only work the hours you can afford, and you don’t incur the overhead costs of having a full-time employee.”
Step 5: Consider offering benefits
A fair wage isn’t the only element of compensation. You can also attract top talent with other benefits like health insurance, a rewards and recognition program Recognition ideas article, performance-based annual bonuses, flexible work hours, and other company perks like a gym membership or product discounts. You wouldn’t believe how excited people get about an in-office ping pong table. Kidding… sort of.
Step 6: Offer and negotiate with candidate
If you’ve gotten this far, give yourself a pat on the back! You’re well on your way to hiring your dream team. It’s now time to take the plunge and extend an offer.
As you head into salary negotiations, it’s crucial to think back to the very first tip we talked about: your mindset of fair pay for value. You’re hiring a human, not buying a car. The candidate is seriously considering spending the largest portion of their time helping you grow your business. And they’re probably going to have a strong opinion about what that’s worth, especially if you’re filling a more senior role.
When you finally extend your offer, make sure it’s competitive in the market. Lay all your cards on the table: both proposed salary, and company benefits.
Let the conversation begin!