How to Calculate Appropriate Work Pay

If you’re a small business owner, trying to figure out how much your employees should be paid can be tricky. On one hand, you want to keep as much money in the business as possible to maximize profits. But on the other hand, you should compensate employees fairly according to the work they perform for your company and their experience and skills. While calculating what is appropriate pay for your workers is a partly subjective task, tools are available to help you make a fair and informed decision.

  1. 1.

    Consult the U.S. Bureau of Labor Statistics. This government agency tracks salary information across a wide variety of professions. Finding out the median earnings, as tracked and reported by the BLS, can provide you with a baseline for determining how much is appropriate to pay your employees.

  2. 2.

    Check salary calculators. These can provide additional salary information -- often by years of experience or education -- to help you determine whether what you think is fair pay is in line with what similar employers are paying for the same jobs.

  3. 3.

    Read the advertised job openings in your local newspaper or online job boards. Look at what other employers are offering to pay workers right now for the same jobs.

  4. 4.

    Consider your employees educational backgrounds and years of experience in their field. Decide whether they should be at the low, middle or high end of the pay scale. According to the Small Business Administration, you should aim for compensating employees at between 85 percent and 115 percent of what you find is the midpoint pay for the particular job in your location and in the current market.

  5. 5.

    Consider other forms of compensation besides salary or hourly pay. These might include bonuses, commissions and other benefits such as contributions toward a retirement plan or assistance with college tuition.

  6. 6.

    Come up with a base salary or hourly pay rate that takes into account all the previously mentioned factors. Remember that paying at the very top of the pay scale leaves little room for raises, while paying at the very bottom does nothing for employee morale and may actually end up costing you a lot of money in employee turnover.