Compensation packages for small business — which one is right for you?
While many small businesses have a solid business plan in place, they often falter when it comes to implementing a compensation strategy.
Every business needs to have a compensation plan in place that reflects its overall strategy and values. Failing to strategize hinders your ability to compete for the best talent. But what type of pay structure will work for your company?
To choose among available compensation packages for small businesses, consider the following tips:
Don’t wait to strategize
Katie Busch of HR Communication Consultants says small businesses need to keep their salary structure current, while also offering a competitive advantage over other small businesses in the same market.
“Many small businesses mistakenly believe that having a compensation program in place isn’t something they need to worry about until their company gets much bigger,” Busch says. “They often believe having a compensation plan will limit their ability to make good business decisions in regard to employee pay, but often the opposite is true.”
Your pay structure is a vital piece of the overall pie. Having a set plan for it gives you a better, clearer picture of your business, and therefore allows you to make better decisions.
Look at the job and its location
Salaries for small businesses are not necessarily based on the same data used by large companies. When determining a job’s market value, job location is often as important as the job title.
The Small Business Administration has a wealth of information for business owners and recommends doing an online search using keywords such as “Administrative assistant, salary range, [your location]” to determine how to better understand the market for particular jobs in your area.
“Look at where you’re competing for talent,” says Tim Low, Senior Vice President of Marketing at Payscale.com. “For many positions, especially in technology, companies may be national, rather than regional.”
If you’re seeking candidates who live outside of your immediate area, be sure to utilize a salary relocation calculator to help determine fair compensation.
Be transparent about your compensation strategy
In the past, many businesses believed that talking about compensation should only be done behind closed doors. But Low says that successful small businesses today believe in an open pay policy that reveals a compensation strategy that is committed to investing in top talent.
“Being honest and candid about your compensation practices and how you benchmark salaries can have a positive impact on trust and employee morale,” Low says. Plus, the growing trend among workers is to talk about their salaries with others, so you might as well be transparent about it from the get-go.
Consider implementing salary ranges
While not all businesses feel as though they are ready to implement salary ranges, Low says that including a pay range in the compensation package for your small business can be very beneficial.
“By establishing a salary range, you can show employees where they are starting on the range, and illustrate how they have room to grow,” he says. “If an employee is at the top of the salary range, you can talk to them about a growth track, and how they can thrive at your company, perhaps by getting the skills and training needed to be a manager.”
Anticipate expectations about reviews, raises, and bonuses
Low says many small businesses are moving away from annual reviews, preferring instead to offer more frequent feedback. This strategy is particularly important for retaining millennial employees.
“Many large companies including IBM, Microsoft, and General Electric are leading the trend by replacing annual performance reviews and offering employees more frequent informal reviews, where they can set and update quarterly goals and offer opportunities for individual growth.”
Paige Campbell, president and partner at Grady Britton, a creative agency in Portland, says her employees receive quarterly rewards based on performance including a bonus day off or a long, leisurely lunch paid for by the company.
Employees and work teams are also celebrated throughout the year when they have demonstrated superior performance. “If someone has done an outstanding job, they may receive a mid-year raise; we won’t wait a full year to acknowledge their achievements,” Campbell says. This type of compensation also helps incentivize your workforce.
Don’t forget about benefits
Compensation packages for small businesses aren’t just about the money, which can be good news for business owners on a tight budget. Additional ideas for attracting and retaining great employees include:
- Flexible work schedules and remote work options
- Better vacation and sick day packages
- Health and wellness benefits
- Exceptional work culture and environment
- Employee perks like discounts and company parties or trips
- Skills and career development programs
Getting creative and understanding the expectations of today’s workforce can help you offer a competitive compensation package even when you’re faced with a tight labor market.
Find and retain top talent as a small business owner
Competing for top talent as a small business owner is no small task. And choosing a compensation package for your small business is just one piece of the puzzle. But it is possible to find and retain high-quality candidates who will help your business grow. Sign up for Monster Hiring Solutions today to receive expert recruiting advice and the latest in hiring trends.