Creating a Competitive Compensation and Benefits Package

Hiring and retaining good employees is dependent on the adequacy of the compensation and value you provide. The quality of life in the workplace can also be a major factor, but getting a new employee in the door depends on pay and benefits.

Balancing the cost of having an employee against the benefit that employee will provide is individual to every business. However, assuming your financial situation permits adding or replacing employees, establish what you'll offer. Do this before you place a job ad or otherwise publicize the opening. Know how much you can, and would, pay before talking to any potential applicants.

How do you determine what's competitive? Obviously, there are industry and geographic practices that impact an applicant's expectation. Beyond that, there are a number of ways to find out what you'll have to offer a prospective employee.

Consider your own experiences. Do people who leave express dissatisfaction with the pay or benefits? Were they hired away by a competitor for more money? Is your turnover higher than you think it should be? These are all indicators that your pay and benefits package is inadequate. Failure to adjust pay based on external factors, such as inflation and low unemployment, is one reason that your pay may no longer be adequate.
Look at the job ads for positions similar to the one you wish to fill. What are other companies paying? Do they feature extensive benefits (lengthy vacations, profit-sharing, excellent health insurance) as a selling point in their employment ads? Are there other factors, such as location, that make your business more or less desirable to employees?
Consult others in the same business. This isn't always an option, but networking opportunities do exist. Talk to competitors, employment agencies, job applicants, and anyone else who might help. If you know people doing the same type of work, ask them about salary ranges and benefits.
Check public sources for information. The Bureau of Labor Statistics has occupational compensation surveys for many geographic regions, broken down by occupation. Other information sources include your local chamber of commerce, better business bureau, trade associations, and consulting firms.