Choosing the Right Salaries for New Employees

Determining the optimal salaries for new employees can be a complex calculation – and the math can change employee-by-employee… even at the same position/level. In order to minimize turnover, you need to set a range for how much employees in each position should be paid. This range is based on your expectations out of the position, the amount of past work experience that you expect a new hire in that position to have, and other internal factors (such as revenue generated from that position, turnover, etc.) You’ll need a starting point – so how do you determine that? Keep on reading!

The Six Factors of Salaries


Your goal is to both attract and retain top talent… and all of your competitors share that goal. Therefore, in order to land the talent that will help your business succeed, your salary range must be competitive with what other companies are offering for a similar position. Consult your connections throughout your industry and check job listings to determine what the average offer is for the position. Be sure to factor in local cost of living and applicable labor laws as well. Additionally, consider the level of experience you expect from the position, as seasoned professionals require higher salaries than entry-level workers.


Check your balance sheet. How much can your business realistically afford to pay, factoring in the amount the new employee will be bringing in (or saving) your firm? You might find you’re able to outcompete your business contemporaries with a higher salary, or you might find that you’ll need to make cuts elsewhere to bring on new talent. Set a maximum salary, and don’t exceed it!


Flexible benefits are a great bargaining tool. Allowing new employees to choose the benefits that are important to them individually, such as health insurance, savings plans, hours/locational flexibility and training can actually save you money in the long term, as many will gladly choose benefits over cash salary. Supplementing salaries with benefits and a desirable company culture, and you’ll be providing a great compensation package to new workers.


You need to factor expectations into your salary calculation… both your expectations and theirs. Even after completing the above steps, you may find an that a talented applicant is expecting a much higher salary than your budget allows. If that’s the case, it may be time to reassess your expectations or financial means. However – if their salary requirement is only slightly out of your budget, and you see this person as a desirable candidate, you now have a great opportunity to offer additional compensation offered through your benefits package. Again, employees are often willing to lower salary demands if other benefits are good.


Bonuses, tied to specific and agreed upon results or company performance, are a great way to reward great work from an employee. Additionally, if you tie these results and rewards to monetary markers, you can ensure that you’re generating the extra billing to cover the costs of the bonus!

Seniority & Tenure

It’s a bad idea to pay a new hire more than a veteran in the same position. You’re very likely to end up with disgruntled, unmotivated workers – and new employees that know you don’t reward loyalty and seniority. On top of all that, you also risk discrimination lawsuits if the existing employee is in a protected class — female, minority, over 40, disabled — and the new hire isn’t. As always, it pays to stay informed about the laws in your area as far as this goes, and if you have any questions, give your HR team a call.

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Determining Salaries Can Be Complicated. We Can Help!

If you want to work with a professional to make sure you’re giving a reasonable compensation package, we are here to help. We specialize in HR and Payroll Services – and would love to be your partner. Request a free quote on our pricing! to get the process started. If you have any questions, feel free to call us at (804) 364-7220 or fill out the contact form below. We look forward to speaking with you!

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