One of the most important features of a successful business is its staff. If you’re lucky enough to find and hire quality employees, the next challenge is to keep hold of them for the foreseeable future. While some of that comes down to your work culture how much your staff enjoy their role, the blunt reality is much of it boils down to how much they’re getting paid.
Deciding on how much to pay your staff can be an interesting balancing act. On one hand, you want to pay your staff what they deserve, keep them happy and motivated and encourage them to work to the best of their ability. On the other, you have your bottom line to worry about and not plunging too much of the business’s finances into the wage bill.
To help you find that sweet spot, here are six key considerations to take into account when deciding how much to pay an employee.
Your overheads
As we’ve alluded to in the introduction, the other financial rigours placed on your business may play a significant determining factor in how much you can afford to place on your wages. Wages are just one of numerous essential overheads that need to be maintained on a weekly, monthly and annual basis as a business.
When building your pay structure, your other obligatory spends such as rent, bills and taxes must be factored in and be realistically accounted for.
The tools for the job
Depending on the type of work that you do, the cost of the tools required to do the job itself may weigh in on how much you can afford to be paying a member of staff. Say in the beauty world, for example, technicians are using everything from pedicure kits to hair straighteners on a daily basis. These items are costly and usually needed in large numbers, which means your equipment costs become a part of your essential overheads, and therefore have to have a bearing on how much money you can separate for wages.
The state of your business
How is your business performing? How established is your business? What do you want from the business in the next few years?
Questions like these are all push and pull factors for deciding on how to pay your staff. For example, if the business is performing well, you might wish to reflect that in an increase in staff pay – after all, they will have no doubt been instrumental in building that success. Likewise, if your business is well established with a steady, fruitful revenue stream, you may feel comfortable enough to put some more money in your employees’ pockets.
On the flip side of that, if times are tight or the business is just starting up and needs all the financial support it can get, you may wish to look in the opposite direction and not make any moves. Your circumstances as a business matter, and as long as you’re open, honest and fair about those with your staff, they’ll understand your actions.
Their position
Naturally, the level of seniority of a particular staff member matters. While you want everyone in the team to feel they’re working in a rewarding environment, your wages need to reflect the hierarchy in your business and the impact staff at different levels make to the operation.
Operating a relatively traditional structure around pay tiers can also incentivise your staff to grow and develop in their roles, climb the ladder and become a more important figure in your enterprise.
Their experience
Experience is typically closely linked to seniority in the business, but acknowledging your employee’s experience levels helps your drill down further into their worth and what they deserve to be paid. This might mean one junior member of staff deserves a little bit more than another, as they can offer more to the role right now – having done more of it in the past.
Acknowledging experience also shows respect to your staff and the time they have put into their careers to date.
Their value to your business
A final incorporation of the last two factors plus a little bit more, the fundamental question you should be asking yourself regarding paying your staff is just how valuable are they to your business?
Good staff, as in the ones that can really help drive your business forward and create positive change, are typically hard to find and in high demand in every industry. If you have one or more of these people in your business already, ask yourself what the cost would be in terms of having to replace them. That should factor in a variety of things, including the cost of recruitment and the time lost while their skills aren’t available, not to mention the consideration that the next person you take on might not be as good as the last.
Essentially, if you know you have good people in your business, make sure they know they are valued in, amongst other things, their pay. A little bit extra on the wage bill now could lead to greater successes for your business and help to prevent any detrimental losses in the future.
So, a number of factors to bear in mind, but fundamentally you should prioritise paying what is fair to your staff rather than what you think you can get away with. Do the former, and you should see the financial benefits down the line.
