Set the Right Salary

03/07/07

Avoid “Buyer’s Remorse”
The recession is over, and it is time to fill a few gaps in the workforce. Maybe it’s an open job you’ve left unfilled for a spell, or maybe it’s a brand new position. Either way, you have a problem: What do you pay?

According to HR consultant Paul Toth of HR Resolution, LLC, in North Ferrisburg, Vermont, too many HR people head to one of the many Web sites that chart salary levels. “These sites use national salary survey data that can be of dubious quality,” says Toth. “Then they apply a multiplier for your area based on living costs and other variables. While they will tell you what national information suggests pay in your area should be, they don’t tell you what the actual salaries are.”

How accurate is the information? Toth: “In some cases, it can be dead on. But in most cases, it’s not—and the salary listed is usually higher than it should be, rarely lower.”

Look in the Paper
Toth says the easiest way to set a salary is to scan your local paper for similar positions. Some will list a salary range, and most will list the benefits companies believe are necessary to attract the right kind of applicant.

If you come up dry, try a salary survey. “But,” advises Toth, “use one based on companies in your locale. Surveys provided by large, national companies often come up with figures for your area by extrapolating data they collected elsewhere.

Other good bets for salary surveys include local professional associations or your Chamber of Commerce. It’s also valuable to discuss salary ranges with your counterparts in local companies. (But be careful to keep your conversation general. Price fixing—in this case the price of labor—is illegal under federal anti-trust laws.)

What if you Perils of Underpaying
When creating a new position or hiring for an open one, outline the minimum skills, education, and experience required to do the job. Set a salary range based on those job specs.

And don’t set the salary too low, hoping to get a bargain. “If you do,” says Toth, “you’ll see the effect in a disappointing applicant pool. The people who apply won’t be the kind of people you want or need.”

The Perils of Overpaying
Buyer’s remorse occurs when you wake up in the middle of the night wondering if you could’ve hired a person for a lot less money. You can avoid this situation by knowing your own comfort level when it comes to pay and benefits.

“It’s very commonplace these days to negotiate for a salary. Applicants will have a pretty good idea what they’re worth, so it is important for you to know what that position is worth to you. Make a reasonable offer and be prepared to negotiate upwards. But know in advance how far you’ll go, because going beyond your comfort level results in buyer’s remorse.”

When You Can’t Pay Top Dollar
Sometimes you can’t pay a competitive salary. What can you offer top performers instead of money?

“First thing to remember,” Toth says, “is that people get a job because they need money. But they do a good job for other reasons.” These include pleasant or challenging work, innovative benefits, good working conditions, enjoyable coworkers, prestige, and flexibility.

For example, some applicants might be attracted to a benefit like a cafeteria plan that allows them to use pretax dollars to pay for child-care or health benefits.

And don’t underestimate the power of family- friendly policies. Toth: “If you allow flexibility—to go to the doctor or watch a child’s soccer game during work hours—you can attract a whole lot of people who might otherwise be turned off by the money.” Toth points to a client, who offered a good employee an extra week of vacation in lieu of a salary increase. “That, to her, was quite valuable.”

Toth’s advice: Know your company’s values and culture and use them to your advantage when courting a top performer.

And whatever you do, don’t apologize because you can’t pay people what you think they’re worth. “That really turns people off,” says Toth. “Play up what you can offer, not what you can’t.”

Look Before You Leap
Says Paul Toth of HR Resolution, your first question in hiring or setting a salary for a new or open position is not “Who” or “How much?” but “Where do we want to be?

Why? Because once you take the long view, the job you’re about to fill may not be relevant. “Take a step back,” says Toth. “Match a job to where you want to be in five years.”

Toth relates a story from a client. A receptionist quit, and they were about to hire a replacement. But they took Toth’s advice and took a look toward the future. They discovered they didn’t really just want someone who could answer the phone and take messages. Instead, they envisioned a capable assistant who could take some of the burden off managers by making cold calls to arrange sales meetings, making travel arrangements, booking conferences, and taking care of details.

In short, the group decided to redefine the job to include more advanced, administrative functions. And, no surprise, the brainstorming paid off: The person they hired has freed up managers to do what they do best.