Pay Up!

Many small and mid-sized manufacturing leaders ask me the same question when getting ready to hire: “How much should I pay this person?”

Like many of life’s big questions, there are lots of potential answers and it takes a fair amount of nuance to come to the right conclusion. However, here are some rules you should follow when coming up with a compensation package for your new hire:

1.   Don’t try to underpay. You will regret this approach, trust me. Employees who aren’t paid enough will eventually find out and they will want to leave. Avoid the headaches of trying to get a bargain.

2.   Gather market data. You can pay for a salary survey or find some free tools online to gather salary data for a given position. Also, consider reaching out to industry connections who can give you guidance.

3.   Consider your current team’s pay. You’ll want to make sure you understand how much the new hire’s teammates or employees at a similar level in the organization make so your pay rates aren’t out of whack.

4.   Think through commissions/bonuses/perks/benefits. If you are a good leader, you plan ahead, right? Hiring is no different. You need to lay out a plan for how this person is going to get paid in all ways, not just salary. Is this a sales role or an accounting job? Those positions should have different pay packages to incentivize certain types of behavior.

5.   Be generous. In short, pay a person what he or she is worth, and don’t make the candidate scratch and claw for a fair compensation package. Those kinds of negotiations add unnecessary stress to the hiring experience for both parties and it starts the working relationship on the wrong foot. Make the right candidate feel wanted by making a great offer that will be impossible to turn down!

6.   Beware of pay policies. If you have pay grades and pay scales at your company that define how much you’re allowed to pay, that kind of structure can be a really good thing for a variety of reasons. However, if your company’s pay policies are extremely rigid, you might run into problems. What if you find a star candidate whose pay requirements are outside of your specified range? As a leader, you should have the latitude to make a judgment on how much to pay an incoming employee (within reason).

if you have questions about how to pay your team, or any aspect of compensation management reach out to our HR consultant, Eric Murray.