Are You Paying Your Employees Fairly?
Take a deep dive into how you pay your team members
One of the biggest questions small businesses owners have is, “how much should I be paying my employees?” Overpaying an employee can eat into funds that could be used for further investment or other growth-based tasks, and underpaying an employee may cause them to quit if they don’t feel valued.
According to a recent study by Glassdoor, 67 percent of job seekers consider salary to be a top factor in considering whether or not to take a job. Employees want to be paid fairly, and it’s every business's responsibility to ensure that they are. Here’s some food for thought to help you decide if you’re paying employees fairly.
What Is Your Budget Like?
Budgets are just one of those things: they can be a pain to create but matter in the long run. Your business budget should include the money that you’ll spend on your employees, but how do you know what to budget for? Compensating employees fairly will cost you more than their hourly rate or salary. You also need to consider taxes, benefits, overtime, paid time off, and any reimbursements you expect to have to pay to employees. All of these costs combined should make up your employee budget.
Compare Average Salary Rates
When trying to figure out if your employees are fairly compensated, it may be helpful to compare average salaries for roles in your industry. If you need to hire a social media manager, for example, you could look up the average salary of social media managers to see if you’re on target. The Bureau of Labor Statistics has a page in which they detail average pay rates for different industries and different regions. Websites like PayScale, Glassdoor, Salary.com, and LinkedIn also publish reports on salary data.
Do You Follow the Equal Pay Act?
The Equal Pay Act of 1963 prohibits employers from discriminating between men and women on the basis of sex by paying employees at a rate less than employees of the opposite sex for work that requires equal skill, effort, and responsibility under similar working conditions. You’ll need to ensure you’re following the guidelines of the Equal Pay Act when you determine your employee compensation. If equality is one of your company's values, this is especially important!
What Do You Pay Your Employees For?
We’re in the 21st century now. Compensation shouldn’t be based solely on service years, years of experience, or traditional merit increases. Intelligence isn’t necessarily a predictor of an employee's ability to execute tasks. It may be time to consider paying your highest performing employees more than underperforming ones, and paying those with higher responsibility more than others. Paying your employees based on the value that they bring to your company is a way to pay them fairly and ensure they feel valued enough to stay motivated at work.
Determining pay gets complicated, and there’s no single one-size-fits-all answer for every company and employee. The U.S. Small Business Administration has a great resource for hiring and managing employees, which can serve as a good starting place. If you’re serious about ensuring that your employees are being paid fairly, hiring a business coach or advisor can be a smart move too.