Figuring out how much to pay your employees can be a very daunting task.
When I started my practice, I had no idea how much money to offer my employees.
Deciding on a salary range seemed more difficult my third semester of calculus.
On one hand, you want to pay enough to get the best possible talent.
On the other hand, you don’t want to overpay.
Start with the basics
You need to establish the salary range for every position that you will need in your practice. Research indeed.com or salary.com to determine the salary range in your area. You’ll find out the high, the low, and the average salary in your area. Armed with this information, you can initiate your employee search knowing what your candidates are going to expect.
Start with the basics You need to establish the salary range for every position that you will need in your practice. Click To Tweet
The best way to determine whether you are willing to pay someone at the top of the salary range is to ask yourself, “how much more valuable will this person make my company?” Let’s say you’re hiring a medical assistant one who has had 20 years of clinic experience in your specialty. That person may be worth top dollar as compared to somebody with less experience. Here we have the top of the scale.
The next step is to figure out the least you’ll offer. How much you pay someone is very different in Baton Rouge, LA than in New York City. You also need to know how much other practices in town are offering. That’s where understanding your market comes in. Market rates set candidates expectations.
The best way to determine whether you are willing to pay someone at the top of the salary range is to ask yourself, “how much more valuable will this person make my company?”
How do you decide what to pay?
It’s really based on how much experience the person has and how much you think they’re going to bring to your team. This needs to be a fact-based decision, not an emotional one. As a corollary I’m not a fan of hiring friends and families because it tends to cloud our judgment.
Let’s say you’re lucky enough to score the perfect applicant and they want the top of the salary range. Before you hire them, consider this. Most people expect an annual pay raise. And while your business’s revenue may not increase every year, your employees’ expectation is that they’re going to get an annual raise. If you hire someone at the top end of the salary range, consider what is going to happen in subsequent years.
while your business's revenue may not increase every year, your employees’ expectation is that they're going to get an annual raise. If you hire someone at the top end of the salary range, consider what is going to happen in subsequent… Click To Tweet
The last thing that you want is to hire the rock star only to have them quit a year later because they are mad that you did not give them an annual raise because you hired them at the top end of your salary range. Discuss this with them before you hire them. You may elect to increase their compensation by adding bonuses based on defined performance indicators. Or offer other benefits that de facto increase their compensation package. But you want to have a plan for this before hiring someone at the top of your pay scale.
Conversely, let’s say you want to hire someone with little experience. I’ve done this multiple times. For example, my clinic partnered with one of the local technical colleges. We would have two to three student medical assistants intern with us (for free). If one of them was a star, we would offer them a job. Clearly, since we were hiring them at the end of their internship, they had no experience. How did I deal with their salaries? We offered them the lowest end of our salary range to. If they proved themselves during their 90-day probation period, we increased their hourly rate.
We offered them the lowest end of our salary range to. If they proved themselves during their 90-day probation period, we increased their hourly rate. Click To Tweet
Now that we have discussed the top and bottom of the salary range, what about the middle? A full time, 40-hour position is considered to be 2080 hours/year. Every 25 cent increase translates into $520/year increments. There is no correct answer for how much to offer employees or what raises to offer other than to understand the ceiling and floor of the salary range. In general, I would recommend making 25-50 cent increases at most. You want to be competitive in terms of the salary you are offering but you don’t want to box yourself into a corner in terms of the base salary.
My final thoughts:
You’ll want to offer the least amount that it takes to hire your ideal candidate. You know that by doing the market research. Use bonuses and other strategies to supplement the base salary of your star employee rather than increasing the ceiling of your salary range. Anticipate the expectation of yearly salary increases.
