How Much Should You Actually Pay Employees?

In 2020, the percentage of hourly-paid workers earning the federal minimum wage or less declined to 1.5% For many, however, the federal minimum wage is not a livable wage.

Determining how much to pay employees can help you find good hires and increase employee retention rates. If your business can pay above minimum wage, you’ll find more productive employees to take on a certain role.

How much should you pay employees at your company? Keep reading to find out.

Determining How Much to Pay Employees

Before deciding what to pay employees, think about how much you have to spend on salaries for everyone. Determine how much of your business revenue should go to your employees.

Employee salaries are likely going to be the largest expense your business has. When you create a budget, you’ll have an easier time with small business payroll. Learn more about streamlining the payroll process now.

With your overall budget, you’ll be able to look into paying employees individually. To determine an employee salary, here’s what you’ll need to consider:

Job Type

Paying employees will relate to the job description. Some job titles aren’t specific enough to determine pay because roles have different functions depending on the business.

Writing a complete job description can help you compare the duties of the job, the skills, and the level of experience needed. With these details, you can research average pay more accurately.

Average Pay

Through research, you can figure out what to pay your employees by finding comparable roles in your same industry.

The Bureau of Labor Statistics has detailed average pay rates for multiple industries in different locations. Other websites like Glassdoor,, and LinkedIn publish data on salary reports as well.

Keep in mind that a pay rate will depend on the cost of living in a certain area. Create a pay range you feel comfortable with by looking into low, average, and high pay rates.

Candidate Pay Expectations

Keeping employees happy has a lot to do with the pay rate they receive. Along with paying them a fair and livable wage, you should leave room in your budget to offer raises and bonuses when the time comes.

During the interview process, it’s important to ask potential hires what they expect to get paid. From there, you can go into the negotiation process with a range in mind that fits your budget.

Legal Parameters

There are certain laws about managing employees through a fair salary. In your area, understand the regulations regarding the following:

  • Exempt vs. nonexempt employees
  • Labor laws
  • Reimbursement

States and counties might have different laws.

How Much Should You Pay Your Employees?

There is no one size fits all answer to how much you should pay your employees. Whether your business is small or large, you’ll want to make a budget to decide how much you can afford to pay your staff.

The pay rate you come up with should depend on job type, the average pay for similar jobs, candidate pay expectations, and the law.

With this guide, you have everything you need to come up with a fair pay range that can keep employees happy. For more business articles like this, check out the other posts on our blog.

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