As an employer, payroll will be one of your major expenses, if not THE major expense. Just how much should you pay an employee for a particular job? What is the REAL cost of that employee? How much should you expect from them in terms of productivity? Read on for some insight into these issues.
Clients have asked me over the years: "How much do I need to pay to get a good employee?" The glib answer is, "As much as it takes to hire and retain one." The precise answer is considerably more involved...
Job seekers will accept a position at a given salary for a multitude of reasons such as: they have been out of work too long and must accept the next position offered; the job offers better pay or benefits than similar jobs in the area; they are attracted by the 'corporate culture' of the company and want to be part of it; the job offers benefits like a convenient work schedule or an easy commute, that offset pay considerations; or any number of other factors. Thus, employers must look at the local job market and determine what the competitive factors are. Is your company the only one of its type in town? If so, workers with the skills you need may have to commute elsewhere if they don't work for you. They will take he cost of that commute in time and dollars into consideration when reviewing your offer. Do other companies in your area employ people with the same skills? If so, you will have to be competitive with their pay and benefits in order to attract and retain quality employees.
There are a number of tools to help you determine how much other companies pay for a given job in your area. The Ocala / Marion County Economic Development Corporation's website at www.ocalaedc.org has data under 'Demographics' that shows, for example, that the average Marion County wage in the Retail Trade sector for 2006 was $23,092. The U.S. Department of Labor Bureau of Labor Statistics has national, state, and regional wage data on its website at www.bls.gov/bls/blswage.htm which includes information for the Ocala Metropolitan Area. It shows not only average earnings, but also average hours per week for hourly employees. There are many websites that sell salary information for employers and most of them have some free data available. It is, however, limited to that website's database so results will vary somewhat between websites. These sites do, however, provide a salary range for each position based on the employees years of experience. The site www.salaryexpert.com indicated that a secretary in Ocala averaged $22,091 with a range between $17,173 and $27,633 at a company with between five and nine employees. The site http://hrsalarycenter.com showed the average as $24,006 with a range from $19,085 for the bottom ten percent of those companies to $29,863 for the top ten percent. The State of Florida also has data available at www.labormarketinfo.com/library/oes.htm which shows for the Ocala Metropolitan Area the number of jobs in each category, and the average, entry, and experienced wages for each position. This data is also accessible from www. myflorida.com.
What is an employee's real cost to an employer? The data on http://hrsalarycenter.com includes benefits paid in the local area as well as average salaries. For the secretarial position with the average salary of $24,006 the average benefits (as of July 2007... note how current data is when you use any of these sites) were as follows:
- Bonuses $289 - 1% of total
- Retirement (Social Security and Pension plans) $4,386 - 12% of total
- Health Insurance and Disability $5,718 - 15% of total
- Vacation and Sickdays $3,177 - 8% of total
Thus, the real cost of that $24,006 secretarial job to the employer is $37,576. Note that the total value of benefits paid by the employer amount to 57% of the base salary! With ratios like this you want to be certain that your employee meets productivity expectations. But what are they exactly? How many sales calls a day should you expect from your sales staff and how may homes a day should a home inspector inspect? Answering this question requires data that is even more specific than wage data. While there are some websites that provide or sell data, the information with the highest validity will come from industry and trade associations. If you are already a member it may be provided for free, most organizations either charge non-members for the data or require membership for access. Many trade magazines also provide this information in the form of annual articles. You can locate trade magazines via an Internet search, listings in The Small Business Sourcebook (Published annually by the Gale Group and in the reference section of the public library), or by contacting the Small Buisness Development Center at 622-8763 in Ocala (the SBDC has a library of trade magazines).