Working out what to pay your staff
After months or even years of grafting alone to get your business off the ground, once you’re finally in a position to take on your first employee, this is a big milestone.
Employing new members of staff brings fresh points of view and unique skillsets to your company. However, it also carries a great deal of responsibility. As a first-time employer, you will have a lot of difficult decisions to make – even before any interviews take place.
Pay is arguably one of the top most important aspects underpinning an employer/employee relationship, so getting this right early on is crucial. Too little and staff will feel undervalued and unmotivated. Too high and your profits will suffer. Finding a happy medium that works for everyone is tough.
To help you on your first steps to becoming an employer, the team here at Panthera is pleased to present our essential guide to working out the right pay for your new member of staff.
1. Establish what it is you’re looking for
What exactly are you wanting to hire someone to do? How much value will they add to the company?
A good way to assess the value an employee would bring to your company would be by considering how much time or money you are currently taking on the tasks they perform. If hours of your week are taken up on the phone to a IT support line, or simply trying to figure a problem out for yourself, an IT specialist could be extremely value to your company as this will free up time to make more sales.
You may also wish to look at the profit potential of a particular role within your company when working out the employee’s salary. A salesperson’s wages, for example, could be calculated based on you’re the revenue they bring into the business.
Not only does doing this mean you are able to see the real value of an employee but you can also see whether they are delivering a return on their wage. It is also possible that, in the end, you realise it is not necessary or financially viable to hire anyone at all at the moment.
2. Research is key
Once you know what you’re looking for and how valuable the employee will be within your business, you can start thinking about what to pay them. When in doubt about the salary should be for your employee, try to find out what they would be earning elsewhere in a similar role.
Many new employers make the mistake of thinking that the competitive workplace means any employee would be happy to work for them. Whilst this may be true to some extent, it is important to remember that, when looking for skilled and experienced staff, you are in deep competition with other employers.
3. Consider other costs
Of course, it is also important to remember that your employee’s wages are not your only expense. You’ll need to factor in employers’ National Insurance Contributions, pensions, and other potential costs such as travel expenses or training.
And, before you even hire the employee, there are things to consider. Finding potential candidates can be extremely time consuming if you do not have a designated hiring manager – there’s also many hours you will spend interviewing prospects.
Advertising your vacancy will also load on more costs to the hiring with some online job sites charging £5 per day or that the advert is up, in addition to the initial sign-up.
4. Stay flexible
Although it can be an awkward topic for some, you should be prepared for when an employee inevitably enquires about their salary or tries to negotiate a higher rate. Be flexible during these meetings whenever you can, as even meeting the employee halfway can have a significant impact on staff loyalty and productivity.
Happy staff are profitable staff (most of the time) so making sure employees feel valued in their role is an essential part of running your business. If employees are continuously performing exceptional work, increasing wages, when it’s possible, is a great way to show them that their effort is appreciated.
5. Follow the rules
As a first-time employer, it is important that you start as you mean to go on. From the moment you take on your first member of staff, make sure you follow all current policies and legislation with regard to minimum wages, equal pay, and pension provision. Make sure that you give every employee a written payslip either on or before their payday for their records detailing the deductions you’ve made.
For further advice on the accounting implications of hiring staff, speak to your accountant today on 01235 768 561 or at firstname.lastname@example.org.