Planning an Effective Pay Scale for Your Small Business

Any small business that plans on growing will have to eventually hire employees or individual contractors to help carry the day-to-day workload. As much as business owners wish they could do it themselves — that way they know it’s being done right — there simply isn’t enough time in the day to support that. 

Before you can confidently hire someone to fulfill a position, you need to ensure your small business has an effective and profitable pay scale that allows you to grow. Otherwise, your employees will end up hurting your growth rather than helping it. 

Whether you’re just starting to bring employees on or are re-evaluating your pay scale, we have several payroll planning tips to help you create a reasonable and practical pay scale. 

Step 1: What are the different positions?

Before you start talking numbers, you have to figure out what positions you need to fill. While you’ll want to keep this to a minimum based on your payroll budget, you don’t want to limit it too much as that will cause other issues in your day to day business. Determine the positions you need, then determine the positions you might want — if you can afford it. 

Step 2: Keeping an eye on the competition.

Doing your research in regards to compensation can do two major things for this process — it’ll give you an idea of what others are paying and will give you the opportunity to pay better. Of course, you’ll also want to try and find out what type of benefits other businesses are providing their employees. Oftentimes, an employee would rather take a job with plenty of benefits despite it paying a little less. 

Step 3: Determining a profitable pay scale for each position.

Now that you have an idea of what the market is calling for, you can start to put together a pay scale for each position you’ve listed as a “need.” Settle in on a minimum and maximum amount you’re willing to pay each employee. When thinking of the minimum, keep in mind that the quality of work may be worse than if you go with the higher end of that payscale. 

Step 4: What are the different ways to pay?

Another thing that could change your payroll budget is how the employees are going to be paid. Will they be hourly, salary, or on a fixed-price per gig? There are pros and cons to each one, so you’ll want to make sure the way you choose fits your company’s daily operations.

Step 5: Finding the right employees.

Now that you have taken the time for proper payroll planning, you can start to search for the employees that will fill those roles. Some qualities you’ll want are people that are motivated, experienced, knowledgeable, goal-setters, ready to learn, and team players. Surrounding yourself with the right team can take your small business to new heights. 

If you’re having trouble throughout the payroll planning process, a certified public accountant can help you determine an effective pay scale that fits your company’s budget. This will ensure your company is set up for the short-term and long-term. 

References

Heitzman, Adam. “5 Tips to Determine a Salary Scale for Employees.” Inc.com, Inc., 29 Mar. 2016, www.inc.com/adam-heitzman/5-tips-to-determine-a-salary-scale-for-employees.html.

Robbins, Stever. “How to Set Salaries.” Entrepreneur, 23 May 2006, www.entrepreneur.com/article/159438.