In the US, the median wage is just under $1,000 per week, or a little over $51,000 per year. But as you might’ve guessed, $51,000 per year can be a lot for some places while it’s poor pay for others.
So how much should you really pay employees? How can you ensure they’re properly compensated for their work, without clearing out your profits?
This article will explore this topic in more detail, so read on!
How to Set Wages
To set wages at your own business, first look to your competitors. There are many free salary survey sites online, so browse those to get a feel for how competing businesses are paying their workers. From there, you’ll want to pay just a bit higher to make working at your business more attractive.
Keep in mind that you’ll need to set different pay for the various roles at your business.
Another important thing to consider is your budget. Many businesses spend between 40-80% of their gross revenue on paying employees.
In general, the higher the pay, the better the employee retention, so keep this in mind. Hiring over and over again will cost more in the long run.
On that note, you’ll want to account for possible benefits you’ll offer your workers. For example, there’s health and life insurance, as well as retirement funds. While things like social security and unemployment are mandatory, things like group health plans aren’t, so you’ll want to weigh the pros and cons of wages vs. extra benefits.
And lastly, you need to consider the wage laws, both federal and state ones (there might even be local county wage laws). Currently, the federal minimum wage is set at $7.25 per hour, but your state might have a higher minimum wage. Make sure you’re not breaking any laws by paying below either minimum wage.
Payroll
Once you’ve figured out what you want to pay your employees, you’ll also have to take payroll into account. Typically, spending 15-30% for payroll is good to aim for.
However, do note that some industries might take a little more, such as the service industry. Here, it’s not uncommon to spend over 50% of your gross revenue on payroll.
Payroll usually involves not just employee wages, but also benefits, taxes, and insurances. If you find that you’re spending too much on payroll, then you’ll have to make some substitutions, such as gifts instead of cash bonuses.
If you have questions about payroll, HR Wise can help. Working with a professional is always a good idea because not only can they offer their expertise, but they can also take a time-consuming task off of your hands.
Pay Employees Fairly
We all need to put food on the table and take care of our households, so make sure you pay employees fairly. By using our guide, you’ll be able to do so without eating too much into your own profits!
To learn more about small business payroll, read our other blog posts now.