NFIB

Five Tips on Determining New-Employee Compensation
04/ 09/ 2002


When you have a new employee coming aboard, it's vitally important to set his or her financial compensation at a proper level, because this base level will stay with the employee (and with you) for as long as the employee is with your firm. In today's Workshop, Jeff Moses offers a few tips on accurately (and fairly) determining compensation.

1) As a benchmark, you can check salary surveys provided by various trade associations and by the U.S. Dept. of Labor (Bureau of Labor Statistics). These surveys have somewhat limited value because salaries vary widely between geographical regions.

2) More useful, perhaps, is to compare salaries offered by similar companies in your region. You can determine these with some degree of accuracy by networking with managers at other firms in your industry.

3) Previous salaries of job applicants can help you determine approximate wage levels for incoming employees. If you're uncertain about what to offer the applicant, propose a 5 percent to 10 percent increase over his or her former salary if it's in line with what others at your company are making.

4) In general, consider offering financial compensation based more on the skill of the potential employee than on a salary that would be offered by other companies. If you want to make sure that a top-flight applicant decides to join your firm, offer a little more than he or she would expect to make anywhere else.

5) Always keep an eye on what other employees at various levels are already making within your company. People are going to talk, no matter how firmly they have been admonished not to do so. It's important for the smooth functioning of an organization that no employee feel that he or she is being undervalued financially.

6) Consider offering incentive payments such as planned year-end bonuses, profit sharing, etc. These can be extremely attractive to new employees and will serve to bring them into the team spirit of the company. If you offer such incentives to one employee, make sure that all employees are involved in such a plan.

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