Do you want a successful, thriving business that everyone in town is scrambling to work at? Compensating your employees in a healthy and hearty way is the first step!
Compensation is a monetary value used to recruit and retain qualified employees. It can be an incentive to increase morale and is linked to job satisfaction.
Money used as a reward can encourage performance, although compensation does not always have to be cash for this to be true.
Paying well reduces turnover and encourages company loyalty. Paying too much will put you out of business.
How to determine compensation?
Compensation costs are typically measured as a percentage of sales averaging between 20% to 35%. This varies by industry.
Service industries tend to be higher with percentages of 50% or more. Check with your industry associations to learn how much you can expect be spending and adjust your budget accordingly.
WARNING: All it takes is to be a few percentages over in your wage limit and your profit can be eliminated.
In most parts of the world, there are rules around compensating employees. How well do you know the rules in your community?
Employment standards exist to protect employers and employees. If the law says employees must be paid overtime after 8 hours of work then you need to pay overtime.
You can’t make up your own rules!
Right now you might be “getting away with it”, however, it may be a matter of time before a disgruntled employee changes that. You will be left with a big ugly fine, far more than what you saved by not paying upfront.
The basic rules you need to know
Take some time today and acquaint yourself with the compensation rules regarding:
Compensation for you
The one person often neglected when it comes to getting paid is you, the owner of the business.
Not paying yourself, or paying yourself less than a market wage creates a false economy in your business. Unless you had planned to be a volunteer in your business, calculate the value of the work you do and include that in your budget.
When you add in your wages at fair market value and the business is not profitable, then you may not have a viable business model.
Adjustments need to be made in one or more of your systems so that you can be compensated for your hard work. Or why bother?
Compensating your employees
When compensating employees, it is the little things that can take you out as a small business owner.
Know your numbers, try to keep the emotion out of compensation decision-making, and pay yourself at least a marketing wage.
Enjoy your day!
Do you need help with figuring out what to pay your employees?
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