Establishing the right salary for your first employees is a crucial element of growing your business. Set it too high, and it could have a negative impact on your profit but go too low and you risk attracting the wrong people and may struggle to retain them. So how do you benchmark against the competition?
- Start with a detailed job description
You will need a thorough job description which sets out exactly what the employee is required to do, this will help you to gauge the level of responsibility and compare with the wider industry. Read our guidance on creating a great job description. It’s also essential that you have formalised a job title in the description as this will help you to not only find and recruit the right people, but to be able to understand how your role compares to competitors (see below).
- Benchmark against the competition
Benchmarking doesn’t have be expensive. Whilst you can pay for benchmarking services and professional data, if you’re a start-up you will want to conduct your own market research.
Use job boards to search for similar job titles in your field and area. Salary surveys are also a good way of assessing what the average rates are for varying roles and professions. A Google search will often bring up sector-specific salary surveys to demonstrate the ranges according to job titles. This is a good starting place to get an understanding of what candidates are looking for.
It’s also wise to research rates based on competitors considering size, scope of the role, opportunities for development and geographical location. For example, if you’re based in London then candidates may expect a higher wage. Be realistic, if you’re a start-up then don’t try and compete with larger corporates – you can sell the benefits of working in a smaller business in terms of development and experience.
- Include benefits within the salary structure
Will you be offering incentives, such as performance-related bonus or employee benefits? Take these into consideration when calculating the salary and their overall impact on the bottom-line.
- Be aware of National Living Wage and National Minimum Wage
If you’re recruiting a junior role, you are required to pay the National Minimum Wage to all employees over school-leaving age. For employees who are 25 and over you must pay the National Living Wage, the rates are as follows:
- Age 25 and over: £8.21
- Age 21 – 24: £7.70
- Age 18 – 20: £6.15
- Under 18: £4.35
- Apprentice: £3.90
Employees who also fall under the following categories are also entitled to receive the correct minimum wage:
- part-time staff
- casual or agency workers
- workers and homeworkers paid by the number of items they make
- trainees, workers on probation
- disabled workers
- agricultural workers
- foreign workers
- offshore workers
- Create a salary range
From your market research, it should be easy to create a salary range. You can then offer from within that range depending on the candidate’s level of skills and experience.
- Schedule annual pay reviews
It’s important to set the standard of holding an annual review each year to assess the pay structure and allow feedback from the employee.
Download How-to-establish-the-right-salary-checklist.pdf (11 downloads) as a PDF or call us if you would like to discuss salary benchmarking in your industry.