Not Paying a Competitive Wage (Too High or Too Low)

Common Hiring Mistakes: Part 10

It is tricky business to set a proper starting salary for a position.  Pay too much and you will hurt the company.  Pay too little and you risk losing key employees to better paying firms. When setting a wage, it is important to look at the following four factors:

1. Prevailing wages in your market: This is by far the most important criteria in setting a wage.  In 1970 an accounting clerk made around $6.00/hour.  In 1990 the same clerk probably made around $9.00/hour.  The 1990 clerk wasn’t necessarily 50% better, but inflation and economic conditions had caused the wage to be 50% higher.

Some markets pay higher wages than others.  Our same accounting clerk in 1990 working in New York City may have been paid $12.00/hour.  A small town may have lower wages than a large city, even if it is nearby.

It is important when setting compensation to have an accurate job description for the position and then to compare salaries of others in that position in your market.

2. Amount of responsibility of the position: It is common that wages follow responsibility.  The President of the company gets paid more than the accounting clerk.  Often a new hire is started in a position of lower responsibility, but is given the opportunity to increase his pay as his responsibilities increase.

3. Technical skills and education: Advanced technical skills will require a salary that is commensurate with the skills.  Usually an employee with more education, if relevant to the position, will command a higher salary.

4. Experience: Experience usually translates to more skills and better performance.  However, this is not always the case and you must make sure the experience is relevant to the job you are hiring for.  A good, experienced engineer may not make a good salesperson.

There is a final factor that can turn salaries upside down – anomalies in the job market.  For example, when the dot com boom was in full swing, even the weakest programmers were being offered six figure salaries.  After the dot com bust the best programmers had to take massive salary cuts just to get a job. Same employees, but different economic times make very different acceptable wages. But watch out, as these great programmers will jump ship as soon as the market heats up.

Continental routinely performs wage and salary surveys in Central Indiana and assists clients in establishing and negotiating competitive wages for new hires.  Contact us today to learn more about this service (765-778-9999).

Monday, June 28th, 2010, by admin and is filed under "Employers, Hiring Mistakes, Newsletters, hiring, linkedin, staffing ". You can leave a response here, or send a Trackback from your own site.