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Paying Employees - « back to Articles

A decision that almost every new owner must make is how much to pay employees; also, when and how wage increases will be implemented.

What you pay your staff will reflect on both the employees' contribution to your business, as well as the overall business. If wages are too low the business may suffer from an inability to attract and keep high calibre employees; too high a payroll could cause a business to be less competitive.

Considering all the Factors

There are several decisions you need make before setting a starting wage level.

You will need to consider:
  • individual educational level
  • work-related experience
  • typical pay within the industry
  • first time employment or a seasoned workforce veteran
  • typical pay within the local area
  • availability of qualified staff
  • overall budget limitations
  • bonuses and commissions
When you have decided how much you will initially pay your employees, you should formulate a long term employee evaluation and salary increase policy. Make new employees aware of the policies, when and how they will be evaluated and the financial returns that may be granted. This can help to prevent a decline in morale or drop in productivity.

Establishing Salary Policy

A salary policy should be written and part of an employment package. When you establish your pay policy there are several factors to consider. These include:
  1. The going rate can be determined by comparing the rates for similar work in your community and in the industry. Comparative wages can be obtained from:

    • local Chamber of Commerce
    • retired workers from within a related industry
    • the Provincial Industry Minister's office
    • labour standards boards or associations
    • labour unions and employee associations
    • other local employers or competitors

    If you offer less than the going rate without other incentives such as a benefits plan, you can expect to attract lower quality employees.

  2. Check the federal and provincial Labour departments to determine the legislated minimum wage levels. They will also be able to advise on the requirements concerning holiday pay and statutory holidays.

  3. List the duties and tasks that each job entails, any special skills or abilities needed to fulfill them and the hours the work is expected to be done during (shift). More duties and other than day shifts usually dictate higher pay rates.

  4. Evaluate the complexity level of the skills required to fulfill each job. Specialized jobs normally command a higher wage than those requiring no special skills.

  5. Establish a regular procedure for review; how well the employee performs on the job relative to the job description. An evaluation process should be adopted with the results of the evaluation being shared with the employee. Sharing the evaluation results with the employee will provide motivation for needed improvements or the opportunity to introduce an increase in salary as reward for a job well done.

  6. Monitor wage level changes resulting from local union contract settlement, inflation, or government legislation or technology changes in an industry. Always be aware what the wage levels are as offered by your competition. These changes might necessitate adjustments to your pay policies and/or benefits package.
Consider all the factors that have a bearing on wage rates and then establish a wage policy based on performance reviews. Doing this, you will ensure that your employees are paid equitably and are motivated for top performance.
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