We talked a bit about how to come up with a salary range for an individual employee in our article on how to write a job description. In today’s article we are going to continue our series on how to hire and manager with a deeper dive into pay and how to come up with a comprehensive plan for this component of your company’s compensation policy. So let’s get started!
In this step you should ask
yourself questions such as:
• Do I want to pay more or less than
those companies that compete with me
• Do I want to give a lot of other benefits
besides pay, or less benefits so I can pay
• How do I want to incentivize
• Will owners adhere to the same
compensation plan as employees?
Throughout each stage of developing
your total compensation plan, you should
check if the plan serves all three of the
primary stakeholders in the company:
Step 2: Find out how much the
competition is paying
If you haven’t done so already,
you’ll need create a job
description for each of the
positions in your company so you
can compere what you are
paying with the competition.
When writing the job description
•What is the scope and major responsibilities
•How complex is it and what is its impact on
•What are the knowledge, skills and
competencies required to perform the job.
•What are the education levels and
After that, you can find out
what others that compete for
the same talent are paying.
The primary ways to do this:
• Talk to people within your industry
and ask them what they are paying.
• Use indeed.com’s salary calculator
and advanced search feature at
• Look for salary surveys online by
searching “Your Industry + Salary
Survey” on Google.
With “knowledge” workers, where
creativity is a large part of their jobs,
paying for performance is not the
For these types of workers, providing
them with autonomy, mastery, and
purpose has proved to be a much
better motivator to performance
For more on the dangers of
performance based pay see Dan Pink’s
If you still want to implement a
performance based pay program, here
are examples of the types of things
you want to benchmark against:
• Improving processes and/or results.
• Enhancing customer satisfaction.
• Formulating and implementing new
• Providing innovation and cost-savings to
• Performing at a significantly higher level of
complexity for a specified period of time due
to workload demand or similar circumstance.
For more on Performance Based Pay see this
paper by Oracle and this article from
The first thing you want to do when
budgeting for raises is make sure that
your job descriptions and salary
ranges are up to date. If not you
should raise salaries across the board
to get your employees back in line
with the competition.
Then you should make sure that
pay is fair internally as well. To do
this rank employees who fall under
each job category from best to
worst performer, and make sure no
one is being paid unfairly in
relation to peers.
After making sure that pay
practices are inline from both an
external and internal standpoint,
you can look at rewarding top
performers with raises.
Keep in mind that it’s about
percentages, not dollar amount.
Anywhere from 0 - 5% is the norm
for most companies, and
companies rarely raise someone
more than 10% in any one year.
For more on how to handle raises check this article