It’s in your company’s best interest to offer competitive wages and benefits to your employees. Conducting a salary competitive analysis ensures you’re on the right track — let’s look at seven steps to getting started.
[Read more: How to Determine Employee Pay]
Research compensation trends
Gathering data on what other companies pay their employees will help you understand how your compensation structure compares to what other businesses are offering. It also ensures your compensation plan is based on data.
Make sure the information you’re looking at is accurate and comes from a credible source. The information must also be recent and validated. You can find this information by looking at crowd-sourced data, like PayScale’s Salary Trends.
You can also check the Occupational Outlook Handbook by the Bureau of Labor Statistics. You can use this resource to see the median pay for different occupations and levels of experience. It will also show you the highest-paying and fastest-growing industries.
Conduct a job analysis
Once you’ve gathered market data on compensation, you need to collect and analyze information about each position in your company. A job analysis considers the responsibilities for that position and the experience required to perform it.
You can gather this information by talking to your employees, observing the kinds of duties they perform and conducting surveys. This information will help you come up with a detailed job description.
[Read more: When and How to Give Raises: What to Consider]
Set a pay range for each position
Establishing a set pay structure doesn’t mean every employee with the same job title earns the same amount of money. It’s a good idea to set a pay range to account for differences in education and experience.
For instance, entry-level employees can be brought into a position near the minimum pay range. This gives that person an opportunity to develop their skills and earn more money as their performance improves.
Remember to look at your company’s data on race and gender to ensure that there is no discrimination in how you’re compensating your employees.
Remember to look at your company’s data on race and gender to ensure that there is no discrimination in how you’re compensating your employees.
Know the legal requirements
It’s also important to ensure that you’re complying with state and federal minimum wage requirements. Failing to comply with these requirements can result in costly class-action lawsuits.
The federal minimum wage is $7.25 per hour, but 29 states have their own minimum wage laws, which are higher than the federal minimum wage laws. You should consult an attorney to ensure you’re complying with state and federal requirements.
Be transparent about your pay scale
Once you’ve determined your new pay scale, it’s time to communicate these changes with your employees and prospective employees. According to PayScale, the two most important questions you need to answer are:
- What does my position pay?
- How was that pay scale determined?
It’s essential to provide data to back up your reasoning. Otherwise, it can be hard to explain how these pay ranges were determined. If it seems like you’re being evasive in your response, this can cause problems in the workplace.
Train your managers
Your managers will have to discuss compensation with your employees at their annual reviews. Don’t make the mistake of assuming they already know how to do this — you need to train them on how to handle these situations.
Create formal training on how your managers can discuss pay ranges and benefits with employees. They need to know when these conversations are appropriate, how much they’re allowed to share with employees and what questions should be given to HR.
Re-evaluate frequently
Finally, remember that employee compensation is not static and is constantly changing with the market. You need to re-evaluate your compensation structure every two or three years at the very least. This will ensure your pay scale is in line with what other companies are offering and will help you attract and retain highly qualified employees.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
Follow us on Instagram for more expert tips & business owners’ stories.
CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.
