How To Determine Employees Salary Ranges: A Complete Guide For You

Did you know that the biggest factor in whether or not a job applicant accepts your job offer is their perception of your salary? According to a Glassdoor report, 90% of applicants will not even apply to a job unless they believe they’ll get at least an acceptable salary.

Yikes! That means you can no longer afford to have individual managers assign salaries for new positions; you need an organized process that takes these factors into account.

An effective employee compensation plan will help you attract and retain the best employees while staying within your budget.

This article will provide clear steps on how to determine employee salary ranges, so you can keep the right people and save money at the same time. Consider it your ultimate guide on how to determine employee salary ranges. Let’s get started!

Tdentify The Job You’re Hiring For

The first step in determining employee salary ranges is to identify the job you’re hiring for. The best way to do this is to use the SOW (statement of work) from your job description.

The SOW lists the tasks and responsibilities that come with the role, helping you determine what make up the job. You’ll also want to include job factors like: job location, employee hours, employee skills, education requirements, and work experience.

You should also list the regulatory compliance that comes with the job to ensure you’re following all necessary rules. For example, if you’re hiring someone to work in healthcare, they will need a healthcare license.

Determine What Your Employees Currently Earn

Once you know the job you’re hiring for, you need to determine what your current employees earn. To do this, you’ll need to look at their job descriptions and offer levels as well as their total compensation.

Your total compensation should include not only the base salary but also any benefits, bonuses, and commission incentives.

You’ll want to break down each of these components to determine what your employees currently earn, since they are a big factor in determining what new employees will earn.

Once you know what your employees currently earn, you’ll have a good starting point for determining what new employees earn.

Establish A Benchmark For The Role You’re Hiring For

Now that you know what your employees currently earn, you can use that information to establish a benchmark for the role you’re hiring for.

There are many factors you need to take into account when determining the benchmark for your new role, including: experience, skills, education, and location.

You’ll need to adjust the benchmark based on other factors, like if the candidate is a veteran or an employee has a disability.

Review Market Rates For Different Skillsets

Once you have a benchmark in place, you can review market rates for the different skillsets that you need for the role you’re hiring for.

This will give you an idea of what other companies are paying employees with the same skillset’s. The data will be specific to the region you’re hiring in, the industry, and the company size.

You can find this data in the government’s Occupational Employment and Wages database, on sites like Glassdoor or Payscale, or you can use an HR software solution to organize the data for you.

Keep in mind that even if you have market rates in mind, they’re not set in stone. Take into consideration the company’s budget and the cost of living in your area to determine what new employees will actually earn.

Determine What You Can Actually Pay

Now that you know what your employees currently earn and what the benchmark is for your new role, you can determine what you can actually pay.

You’ll need to take into consideration your company’s budget and what you’re offering in terms of benefits, bonuses, and commission incentives to determine what you can actually pay.

You also need to consider how much your company is growing or shrinking to ensure that your new employees are compensated fairly.

Plus, you’ll want to take into consideration any regulatory compliance that comes with the job, like the Affordable Care Act or minimum wage laws.

Offer Competitive Benefits

Once you’ve determined what you can actually pay, you can offer competitive benefits to attract the best talent. It’s important to note that benefits can vary for different roles, so it’s important to consider your needs and the needs of your employees.

This includes offering benefits like health insurance, disability insurance, retirement plans, and more. It’s best to partner with an HR outsourcing company to help you determine what benefits you need to offer.

Consider Your Employee Experience

When determining what new employees will earn, you also need to consider your employee experience. This means that you’ll need to look at the employee’s experience level, tenure, and education in regards to their position.

This will allow you to adjust the benchmark based on the level of experience an employee has. For example, a director-level position will likely have more responsibilities and earn more than an entry-level position. This will ensure that you’re paying your employees fairly based on their experience level.

Use An HR Management System

An HR management system will provide you with everything you need to implement a consistent and effective employee compensation plan.

You’ll be able to see market rates for different skillsets and use that data to determine what new employees will earn. You’ll also be able to see what your current employees earn and use that data to determine what new employees should earn.

An HR management system will also help you keep track of regulatory compliance and employee tenure, which is important when determining what new employees will earn.

Set Up Job Levels

If your company has multiple departments or job levels, you’ll want to set up job levels. This will help ensure that employees are being paid fairly based on their job title and responsibilities.

You’ll want to set up job levels based on the skillsets required for each position, as well as the education and experience levels required.

Once you’ve set up job levels, you can determine what new employees will earn based on their job title. This will ensure that employees are paid fairly based on their job title and responsibilities.

Summing Up

If you want to attract and retain the best employees, you need to provide competitive salaries. To do this, you have to determine what employees currently earn, establish a benchmark for the role you’re hiring for, review market rates for different skillsets, determine what you can actually pay, and offer competitive benefits.

You can also consider your employee experience to ensure that employees are being paid fairly based on their job title and responsibilities.

Once you have these factors in place, you can implement a consistent and effective employee compensation plan that will help you attract and retain the best employees.

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