(ThyBlackMan.com) Are you asking yourself the question: how much should I pay my employees? If yes, you can learn all about setting salaries in our guide right here.
If you own a business, coming up with a budget for it and sticking to that budget is going to be essential. You’re going to find yourself spending more money than you should every year if you attempt to operate without a budget in place.
Part of this budget should be devoted to paying your employees. In fact, most experts say that anywhere from about 20% to 50% of your budget should be set aside to pay your employees’ salaries.
There’s obviously a big difference between 20% and 50%, though. It’ll leave you asking, “How much should I pay my employees?”
It’s not always easy to come up with a nice round number since the amount you’re paying employees should be based on a bunch of different factors. But you can do it by sitting down and crunching the numbers on your end.
Learn more about how to pay employees who work for your company below.
Begin by Figuring Out How Much You Can Afford to Pay Your Employees as a Whole
As we just alluded to, your employees’ salaries are going to make up a sizeable portion of your operating budget. In some cases, more than half of the money that you spend every month could go to your employees.
With that being said, you really need to get into the weeds when it comes to your budget and figure out how much of it you can commit to your employees. The answer to the question, “How much should I pay my employees?”, is going to be a different number for every business.
If, for example, you have a lot of your budget tied up in other operating costs, you might not be able to hire the best of the best to work for your business. You might have to make do with hiring employees who are paid low hourly rates to work for your company.
But if your employees are going to play a vital role in the success of your business, you might not be able to afford to spend in other areas. You’ll have to carve out a large portion of your operating budget and use it to hire the best employees possible for the jobs you need to fill.
It doesn’t matter if you’re going to spend 10%, 35%, or 80% of your operating budget on your employees’ salaries every month. What’s important is that you come up with a percentage that you can safely devote to your employees and work with it.
Determine Whether or Not You’ll Offer Fringe Benefits to Your Employees
In addition to figuring out how much of your operating budget is going to go to your employees’ salaries every month, you also need to figure out if you’re going to offer fringe benefits to them. Fringe benefits come in many different forms.
Some fringe benefits are:
- Health insurance
- Paid time off
- Life insurance
These benefits will, in some cases, be very valuable to your employees. Health insurance, for example, is a great benefit to offer to those who need it for themselves and their families.
You might be able to pay your employees a little less than you would otherwise by extending benefits to them. They’ll see the benefits as being more important than an extra $5,000 or $10,000 in many instances.
Decide How Much Each of Your Individual Employees Will Make
Once you know exactly how much of your operating budget you’ll devote to your employees’ salaries and determine whether or not you’ll offer fringe benefits, it’ll be time to get down to the nitty-gritty. You’ll have to go through the positions at your company and create a salary for each of them.
The good news is that, as long as you have job titles picked out for your employees, you can usually find out about how much people with those titles typically make. The U.S. Bureau of Labor Statistics makes it easy to find the average pay rates for most job titles.
The key is going to be tinkering with the different positions that you have and making the salaries associated with them fit. You’ll need to create a healthy mix of management positions and entry-level jobs to avoid breaking your operating budget.
Make Sure You Follow Labor Laws When Paying Your Employees
There are lots of labor laws in place throughout the country to prevent employers from taking advantage of their employees. These laws are designed to ensure that workers are paid fairly for their efforts each day.
To stay in accordance with the labor laws, your business will need to decide if you’re going to have exempt or nonexempt employees.
Exempt employees are those who are paid a salary and given a set amount of money every pay period, regardless of how many hours they work. Nonexempt employees, meanwhile, are usually hourly workers who are entitled to get paid at least minimum wage and collect overtime payments.
The paystub template that your company uses needs to be set up to account for both of these types of employees. You should also stay on top of the latest labor laws so that you’re not always asking, “How much do you pay certain types of employees?”
See If You’ll Need to Reimburse Your Employees for Business-Related Expenses
Depending on where your business is located, you might be required to reimburse your employees if they’re routinely subjected to business-related expenses. You’ll need to pay for them to do things like eat and fill up their personal cars with gas while they’re on the road traveling for work.
See if your state requires you to reimburse employees for these kinds of expenses. It could impact how much you’re able to pay your employees as a whole.
There’s No Easy Answer to “How Much Should I Pay My Employees?”
Every single business operates a little bit differently. Some can afford to have nothing but minimum-wage workers working for them, while others need to have highly skilled and trained employees in top positions.
It’s your job to ask yourself the question, “How much should I pay my employees?”, and answer it based on your needs. It’ll help you determine what percentage of your operating budget should go towards paying employees.
Do you need a hand with other aspects of running a business? Read the articles on our blog for more useful business advice.
Staff Writer; Steve Jones