If you have a role to fill at your company, one of the first things you need to do is estimate a salary range for that position. Choosing a fair and competitive salary range helps attract the best talent for that position and it helps you control your expenses. Let's look at the steps you'll take to estimate a salary range.
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What goes into employee compensation?
Employee compensation is the wages you offer each employee, and it includes their base pay along with any benefits, commissions, or bonuses. A good compensation plan can attract top candidates to your company and improve your current employees' job satisfaction. Here are the six steps you'll take to estimate a salary range for new recruits.
Assess the position
The first step is to assess the position and the skills that are necessary for that role. For example, a content marketing manager might have the following responsibilities:
- Creating and executing content strategies.
- Creating content in different formats and for different platforms.
- Managing a team of writers, editors, and social media marketers.
- Analyzing data and judging a campaign’s effectiveness.
Making a list of the different responsibilities clarifies what the position truly entails. This information helps you determine a fair compensation plan for these tasks.
Consider experience and education
The salary will also vary depending on the job candidate's education and experience. An entry-level position typically comes with a low salary range, while positions requiring more extensive experience or an advanced degree pay more.
Some companies post the minimum qualifications they want applicants to meet, as well as the preferred qualifications for the role. Doing this in your job listings can help broaden your applicant pool, but you'll want to set a wider pay range to account for varying experience levels.
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A good compensation plan can attract top candidates to your company and improve your current employees' job satisfaction.
Do a compensation analysis
Next, do a compensation analysis to understand what other companies are paying their employees for that role. Job market trends are constantly shifting, and a compensation analysis is the best way to ensure your salary range meets industry standards.
There are several different ways you can find this information. The U.S. Bureau of Labor Statistics provides salary information for different types of jobs and Indeed offers a salary search tool. You can also find this information by speaking to other professionals in your industry. As you're analyzing the results, consider the size, industry, and location of each business.
Factor in benefits and perks
Compensation entails more than just the salary — it also includes medical or dental benefits, a 401(k) plan, or continuing education benefits offered to employees. You can also offer perks like tuition reimbursement, unlimited paid time off, and remote or hybrid work schedules.
These are popular options for small businesses looking to attract talent on a tighter budget. Try to determine the monetary value of the benefits offered and include that estimation in your benefits overview.
[Read more: What Is Variable Pay and How Can It Help Small Businesses?]
Set a salary range
Using information from the job description, company benefits, and comparable compensation rates, you can now determine a salary range. These numbers will vary based on employee experience and education levels, as well as your industry, geographic location, and business size.
For example, an entry-level employee who meets the minimum educational requirements may start at $45,000 annually. A candidate with three to five years of experience and a degree might start at $55,000, while someone with over five years of experience and an advanced degree could begin at $60,000.
Negotiate with the employee
Your set salary range is a useful starting point, but you might need to be flexible. The negotiation process is a two-way street, and your candidate may need to make more than what you want to pay.
If you find someone with the education, skills, and experience you're seeking but they want more than you're offering, it may be worth negotiating with that candidate — especially if you believe they can bring significant long-term value to the company.
This story was originally written by Sean Peek.
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