Real Small Business: Money Matters

Employee Compensation

From the Editors of Real Small Business

There are lots of ways to make employees happy: a congenial work environment, opportunities to learn on the job, flexible schedules, and the list goes on. But at the end of the day --or more precisely, the end of the week-- employees are made happy by getting paid. Creating an employee compensation plan is vital for any enterprise with intentions to hire a staff.

Creating a thoughtful employee compensation scheme is important no matter how few employees you initially hire. A good employee compensation plan takes into account the long-range goals of your business. And by creating a compensation template you can relax: you won't have to reinvent the wheel everytime you expand your staff.

Keep in mind, only two-thirds of your employee cost is actual raw salary or hourly wage. According to the latest numbers of the Bureau of Labor Statistics, which is part of the US Department of Labor, almost 30 percent of the cost of paying either an hourly or salaried employee goes to benefits, such as health care coverage, worker compensation insurance, and social security payments.

Agencies such as the Better Business Bureau, as well as other government and Web-based resources, can help you understand what benefits are mandated by law. An accountant or a banking advisor is a good resource for discovering the standard ways in which to select benefit providers, such as insurance companies, and how to cut a payroll check with the smallest amount of paperwork. But perhaps the most important task is to investigate your industry to determine the wage scales expected from prospective employees. Finally, be aware that certain businesses regularly rely on unionized workers, which means you will need to compensate workers along union rules.

By doing a little homework, it won't only be your employees who are made happy. With a solid employee compensation plan in the bag, you'll have reason to smile too.

• Meet Ari Sklar, one of the owners of technology company Phlair, who descirbes how he managed to retain and motivate a key employee whose compensation had to be reduced. Click on your preferred video format in the 'Watch the Video' area on the right.
  
  
• Read Deborah A. Keary's answer to the question: "I need to fill a managerial position but can't afford to pay the salary a big business can offer. How do I create a compensation package able to attract a top quality individual?"
  
  
• Access articles about bonuses: how to be fair... payroll management choices... keeping workers' comp costs down... key elements of payroll... workers' compensation Q&A... strengthening your employee compensation package... and working with a payroll service provider.
  
  
• Meet Joe Beverly, CEO of Adaptable Systems Corp., a payroll service provider in Norcross, GA.

We talk about Employee Compensation with Ari Sklar of Phlair.