How to determine a subordinate's salary

M File | Posted on May 07, 2019

When it comes to setting staff salaries, don’t pull a number out of a hat. Salary compensation should be calculated based on 1) company size, 2) company revenue, and 3) industry standard. These three things determine how much you can afford to pay a staff member without making false promises or bankrupting your company.

For small businesses, in particular, it’s important to be realistic in paying staffers. You may want to hire some who is asking for $120K because that was the amount they saw on a website, but you only have $80K available. With a discrepancy of that significance, evaluate the options: pay one person to do everything or hire an additional entry level position and get a second set of hands?

When determining salaries, have your human resources director develop a salary compensation plan. If your small company doesn’t have a human resources department, and you don’t feel confident developing this plan on your own, find a financial professional you trust to help you.

Many small business owners are tempted to accept numbers found on websites such as salary.com. While such sites can offer a helpful tips and guidelines, they don’t necessarily represent the details of your company. Put in the time and effort on a self-audit to be sure you get the numbers right.

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Have an HR person develop a salary compensation for you based on your industry.

— Towan Isom