By: Lydia Dishman, Payscale.com
Determining a starting salary for a new hire can sometimes be tougher than figuring out how much to charge for your company’s products or services.
There are very few guidelines, especially if the position you want to fill is brand new to your business. Then there’s the balance sheet. Set the bar too low and you may not attract and retain the most qualified talent. Nudge the pay needle too high and you risk cutting too deep into your budget.
So what’s the best way to price that starting salary? Here are some benchmarking practices to consider.
Stacey Carroll, director of professional services at online salary database PayScale.com, says that because most people don’t stay in one job for their entire career, companies are paying for expertise rather than keep to a traditional pay structure.
“The corporate ladder isn’t as straight as it used to be years ago,” says Carroll, adding that “Companies are more aware of what skills are valued, and which skill sets translate from job to job.”
That means knowing the job skills you most want to recruit for in your new hires.
Know Your Market
Tracy McCarthy, senior vice president of HR at SilkRoad, a HR software provider, says companies can conduct online research at salary data sites such as PayScale.com to get a sense of what their local market is paying for the same or similar positions.
“A company can also use informal data from prospective employees during the interview process,” she says but must be wary that this may not be completely accurate, since job candidates might inflate their previous earnings in hopes of boosting their new starting pay.
Think Beyond the Title
A non-traditional job title in your job description may prohibit it being easily searchable via a salary database. In such cases, Carroll recommends refining the job requirements by level of education or years of experience, or special responsibilities with the job.
“You still want to pay for the core set of activities the person will be doing but then adjust based on characteristics or certifications or skill sets,” she says. “People who have previous experience want that to be recognized. They don’t want to start over.”
Offer More than the Paycheck
Successful tech firms understand the ferocious competition in recruiting tech talent.
Madhukar Govindaraju, senior vice president of engineering and technology at software company Spigit, uses future earning potential and a vibrant company culture in order to attract software engineers, particularly in the highly competitive tech job market.
“An opportunity to work on cool technology in a pre-IPO startup is a big driver for our engineers,” says Govindaraju.
Carroll says smaller businesses could consider negotiating tiered offers. “Employees may take less up front if they were guaranteed to get a raise if certain milestones are hit.”
She says offering perks unique to the size of the company could also be attractive additions, such as offering a four-to-eight hour release for the employee to do volunteer work or the option to work from home.
Govindaraju agrees, having had success with perks like a less-structured work environment and employees taking ownership over projects.
Both approaches help create loyal employees and make their small, growing business run more efficiently.