How to Pay Your Employees Fairly - BusinessTown

Your business starts here.

Start-a-Business 101: Learn how to start your own business.

How to Pay Your Employees Fairly

 How to Pay Your Employees Fairly To avoid high turnover, you need to pay your employees what they're worth. Learn the four steps of developing an equitable compensation policy.

Have you ever wondered how to pay your employees fairly? I’m David Weaver, president of the Compensation & HR Group. I’m also an instructor at the Compensation Analyst Academy.

Internal Consistency

Typically, when you’re trying to pay your employees fairly you want to answer four questions. The first policy decision is around internal consistency, and in order to maintain that, you’ll want to start by analyzing your jobs. So job analysis is the first building block, and you want to analyze your jobs through talking with folks about what they do.

Start off with a questionnaire or an interview, and once you’ve captured the work that they do, document that in a job description. Then you will evaluate all of the positions in your organization and put a hierarchy together, and that’s the job structure. Once you’ve done those four pieces, you will have internal alignment within your organization.

External Competitiveness

Now let’s talk about the second piece, which is external competitiveness. You want to define your market. Defining your market really means, where do you gain people from, where do you recruit people from, and where do you lose people to? It could be an industry or a geographic location. Once you’ve defined that market, you will need to participate in some credible salary surveys within your industry or geographic location. After you’ve done that, you’re going to be putting together some policy lines and putting together a page structure, which is a series of salary ranges with a minimum, midpoint, and a maximum.

Employee Contributions

Now let’s talk about employee contributions within the organization. You want to be looking at people’s performance and their results and evaluating that information against the objectives stated in your performance management system. Those could be performance based. Some organizations also like to look at seniority, so that’s another basis for looking at performance.

Some organizations will also use things like merit guidelines to distribute their pay increases versus their results and where they’re paid and their salary ranges. You want to utilize incentive plans, like short-term incentive plans, long-term incentive plans, and bonus plans to reward people’s results for the objectives that they’ve achieved.

Pay System

You want to be able to administer your pay system using tools like salary planning, where you plan out where people are going to be paid over the next year, and salary budgeting. This is really looking at what’s going on in the external marketplace and deciding how much you’re willing to spend. Then you’ll want to communicate openly to employees how you’re taking care of your whole pay system.

Program Evaluation

Finally, you want to evaluate your entire program. Go back and look at each component and decide if it’s working for you. Once you’ve done all of these things, then you’ll have a sound compensation system and you can ensure that you’re paying your employees fairly.

Pay Philosophy

Once you’ve connected all these pieces of the puzzle, you’ll also want to articulate a pay philosophy. This is a statement of where you’re going to pay to the external market. So you’re either going to meet the market, lead the market, or lag the market. This will determine what your pay level is in the external marketplace. Most organizations will match the marketplace or they will try to have their salaries meet what their competitors are paying, and that’s the most common type of pay philosophy. You want to make sure that your pay philosophy is articulated so that employees know where you stand against the marketplace.

About David Weaver

David is President of the Compensation and HR Group and is responsible for all consulting functions within the organization.
Prior to joining the Compensation and HR Group, David spent 20 years managing a human resources membership and consulting organization. He has also held positions with industry leaders Liberty Mutual, Honeywell and Hewlett-Packard as a corporate human resources professional. During this period, he gained essential hands-on experience in compensation program development, marketing and internal communications.
A graduate of The University of Massachusetts at Amherst, David has also made his mark in academia, having served as adjunct faculty member for both Northeastern University and Newbury College where he taught courses in Compensation Management and Human Resource Management. He also worked as an instructor for the certification courses at the Compensation Analyst Academy, WorldatWork and the Society for Human Resource Management.

Your business starts here.

We will take you step-by-step through every aspect of starting a business.
Start-a-Business 101: Learn how to start your own business.

Watch our videos to learn how to start a successful business.

Watch free previews

Learn from experienced experts
and successful entrepreneurs.

Why be alone on your business adventure? Let Bob Adams, a Harvard MBA and multimillionaire, and his team of highly skilled experts, guide you on your journey to business success.

Bob has founded over a dozen successful businesses and written 16 business books. He has been featured on TV shows including NBC’s Today, The 700 Club and Oprah! Bob has helped millions of entrepreneurs get started with their own businesses.

Bob Adams books and courses have been featured in:

What entrepreneurs are saying about BusinessTown:

“You so inspired me that I started a business and have started receiving orders. Your lecture series about how to pick a business to start really got me going after I followed your steps to a tee. Thanks so much!” Bill Bennett, Business Owner
“I found great value in the BusinessTown courses. The program is comprehensive, covering everything…It’s like having a team of experienced advisors available 24 x 7.” Dan Sterling, Founder of Water Hero
“Having run across your videos was a godsend to me. Your method provides me the structure I need to be successful. I am willing to put in the work to go through your complete course which so far has been incredibly helpful.” Phyllis Marks, Starting an Online Business
“I have researched the marketplace for over a month to identify a viable and comprehensive ‘go to’ guide on how to best launch a small business. This course offering from Bob Adams met more than what I was looking for.” Steve Cox, Experienced Businessperson
“Bob has been a trusted business adviser of mine for years… guiding me through the challenges we all face as entrepreneurs. Hands down Bob is one of the most talented, and successful entrepreneurs I know.” Matt Marshall, Founder of MGM Capital Investments

Get on your road to success with Start-a-Business 101.

1. Start the course.

Click here to start the course Start-a-Business 101. The course is only $19.95. 60-day money-back guarantee.

2. Enjoy immediate access.

Get instant access to all 78 videos and 46 tools (worksheets, etc.). You will learn step-by-step how to start, run and grow a business.

3. Succeed in business.

You will have everything you need to start and grow your business. You will become a smart, confident, and successful entrepreneur, who makes the right decisions.