Compensation and Other Sensitive TopicsNov 16, 2020
Employee pay may not be the first thing that comes to mind for a new business owner, but as you add people to your team, it becomes apparent this area requires a lot of thought, research, and strategy. The CoLab’s Megan Marsh and Andre Munar have five questions you should ask yourself as you dive into employee compensation and issues that can arise.
Your business is booming, and it’s time to add employees to help keep operations running smoothly. Factoring in how to pay them without having to sacrifice your success can seem tricky. In this episode of The CoLab podcast, Megan Marsh and Andre Munar pose five questions that will guide you in creating fair and enticing compensation packages for your employees.
- How do determine employee pay?
- How do you structure a compensation package?
- What are other benefits you can offer?
- Are there non-monetary benefits or perks you can offer?
- Considering all types of pay and benefits, what is the true cost of an employee?
If you can come up with the above numbers, you can put them into an employee cost calculator (you can use calculators offered by companies such as Intuit Quickbooks and TSheets) to show your total investment into your employees.
For example, consider an employee whose base pay is $35,000 and has the opportunity to earn bonus pay based on their performance.
Base salary: $35,000
Holidays off (13 days per year)
Paid time off (13 days per year)
Paid breaks (30 minutes per day)
Workman’s compensation (1 percent of overhead costs) and unemployment insurance ($150 per year per employee)
Health insurance ($320 per year per employee)
Life insurance and disability ($10 per year per employee)
Total employer investment: $48,770
These types of costs might not come to mind if you don’t own a business, so be sure to illustrate for employees how much you’re really compensating them to work for you.
Ready to dive in? Here’s what we’re covering in this episode of The CoLab:
[04:48] Running a business means navigating sensitive topics such as losing employees, firings, and compensation.
[05:55] Does this sound familiar? Employees coming to you as an owner with issues about their own or each other’s pay, benefits, and workspace. As business owners, Megan and Andre have heard it all.
[08:45] 1. How do you determine an employee’s pay? Are there other incentives or benefits you can provide to employees? Create guidelines that establish pay standards and map out what factors (above average work performance, total sales, advanced degree, etc.) would lead to a pay increase or bonus compensation. Be clear upfront that bonus compensation can change from year to year.
[15:42] 2. How do you structure compensation packages? Base pay is only one part of a compensation package. As an owner, you also need to consider benefits such as family leave and paid time off. Be sure you research what state and federal laws require you to provide as an employer.
[20:10] 3. Are you going to offer other benefits? Other benefits, in this case, means health insurance (How much of the cost are you willing to cover for employees?), 401(k)s (Are you going to match a percentage of your employees’ contributions?), or offerings such as short-term disability, long-term disability, and life insurance.
[22:15] 4. What about offering non-monetary benefits? There are little things about your business that can make a big difference in employee morale. Are you willing to let employees work from home occasionally, work a half-day on Friday, or enjoy a casual dress day?
[24:30] 5. What is the true cost of an employee? It’s about more than base pay. You can use an employment cost calculator to determine the total compensation your employee is receiving.
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