Defining Salary Range for Employees
The salary range is what you pay your employees based on their job or function. There are a minimum and maximum pay rate with opportunities for the employees to increase it. The range of salary is based on the market pay rate which was acquired through studies.
This is a major concern for employers and potential hires. Since you are a business owner, you need a payment scale that is used as a reference when it comes to determining the compensation of an employee. This will allow better fiscal transactions and clear communication in the organization.
The ability to explain the way salaries are given to a potential candidate can make you a desirable employer, and it will attract the ideal talent.
Here are five ways to define a range for employees:
1. Assess the Job and Position of the Employee
Before figuring out the salary scale, you must assess the position’s value that you will pay for. You can start by creating a complete description of the job which outlines the responsibilities and duties that you expect to be done. You must also consider the time needed for it, job title, and other important information.
Once you have clarified the demands of the position, think about how valuable it is to your business. Think about how much time you will need if you did it yourself and how much salary you would expect. By assessing the position’s value and how it benefits your business can determine what you want from the ideal employee and how to compensate them properly.
2. Base it on the Company’s Compensation Principles
Before you create a salary range, the organization should first figure out what its approach will be when it comes to compensation. What mindset does your company have that influences pay decisions? Determining the company’s compensation principles needs a thorough look at your company rules about compensation. The goal is to make philosophy and to have consistency on how it applies to pay practices.
You can choose to lead, unfollow, or match what the market pays when it comes to compensation. If you are a market leader, it means you must pay more for the job compared to your competitors. If you unfollow the market, it means you are paying less.
The attitude of your company when it comes to compensation will influence its decisions through the other part of the process.
3. Adjust for Existing Employees
When you compare current employee salaries to the ranges you made, it is automatic that you will discover that some are paid more compared to what is dictated by the new ranges. In case your employees are paid less than the threshold, you can increase pay.
If you are paying the employee a salary that is above the pay grade, you have a couple of options. You can choose not to give the next raise and give a bonus instead. By doing this, you are not increasing the base salary higher. You can also promote the employee for higher pay. You can also lower the base pay or make them unqualified for increases in the future, but that will only have a negative impact on company engagement and morale.
4. Be Open to Negotiations
Sometimes, negotiations can make you uncomfortable. Employees who can assert their worth normally show desirable negotiation and qualities that likely benefit your business. In order for employees to routinely perform excellent work, it is important for them to be compensated properly and feel comfortable discussing their growth.
If you are willing to negotiate and show flexibility, you will inspire employees to perform better, become loyal, and feel appreciated for their efforts. You must have an open mind and be willing to listen to their side before finalizing the salary range.
5. Educate Your Managers
Managers must understand the compensation principles of your company and how they can give raises and promotions. In addition, your hiring managers must understand their new position’s value. You must schedule group meetings with your managers to talk about how the benchmarking and pay grades to work in your company.
The guidelines on job role reviews, company pay structure, merits of pay raise, and flexibility with salary ranges must also be discussed.
You must make sure to discuss everything with your managers and be willing to hear their opinion when you talk to them. Once you have made it clear to them, they can hire new staff and offer the right pay.
Accounting is not everyone can do, and if you are a new business owner, you can still encounter issues. 3E Accounting offers Singapore Payroll Services to help your company determine salary ranges and make sure you pay employees accordingly.