Providing Competitive Pay

When you first decided to hire someone, you estimated what it would cost you. You had to make sure that you could afford to hire another employee and that the pay would be in line with the market for your area, your industry, and your jobs. The actual amount was probably negotiated at the time of hire.

A common occurrence among busy small employers is to develop a compensation package and then forget about it. However, in order to keep your compensation package competitive and up-to-date, you'll need to periodically review it.

Here are a few suggestions:

Review your package at regular intervals, perhaps every year. The review doesn't have to be elaborate: it can consist merely of having your lawyer review it for legal compliance or getting some salary data to find out what other business are paying.
To ensure that your salaries remain competitive, you should stay aware of the employment market in your area. What's reasonable in 2004 might not be so reasonable in 2006. Keeping up with the employment market also enables you to do a better job of retaining long-term employees by providing information regarding pay for jobs at other than the entry level.
Review the benefits you're offering when benefit contracts come up for negotiation. When it's time to renew a benefit contract, check with other providers to see if they can quote you a better rate for the same coverage. See if the coverage you're offering is in line with what others offer. Too little coverage may mean you need to consider additional benefits and too much may mean that employees don't need all the coverage you're paying for.
It’s time to review your package if you notice a pattern beginning to emerge in which employees are leaving for better pay elsewhere. A constant flow of employees out the door may indicate that you're underpaying your employees. Get salary data to confirm whether this could be the problem.