By Tegan Fitzpatrick
When you’re an entrepreneur, you generally need to understand every function of your company: operations, sales, marketing, finances, and human resources. Many business owners, however, only concentrate on departments that are directly linked to sales and increased ROI, and put human resources on the back burner.
However, by not making HR a critical department in your operation, you are sabotaging your company. This is not to say that a startup should immediately hire an HR coordinator, but if you run a small business, you need to be knowledgeable about HR. Implementing the following practices will put your organization in a stronger position for growth and financial success.
1. Develop a business compensation plan
When you are running a company with 10 employees and each holds a vital position, it can be detrimental if one employee leaves. According to a survey by PayScale, 25% of employees leave a job because they want higher pay. So how do you know what to pay an employee?
Pay them too much, and your company could go bankrupt before your first year is up. Pay too little, and you will not attract quality employees which can also cause your company to fail. Therefore, thoughtful pay scales should be instituted that link employees’ skills and abilities to the market. And by doing this during the early stages of your business, you will save yourself a lot of grief in the future.
Here is how a pay scale will benefit your company:
- You will hire the right employees. If you have researched the market, then you know exactly what kind of employees you will be attracting with the salary you are offering.
- It creates a trusting, transparent environment. In many modern companies, the pay scales of employees are visible for all to see. When your employees know that coworkers with a similar skill set have the same salary, it’s an excellent way to raise employee morale. This also helps your employees to plan for their future with the company, knowing where they want to go with the expectation of the pay they will make.
- You eliminate the guesswork. Companies that deal with compensation by using a case-by-case method will likely create inequity of pay within their organization. This will likely lead to employees becoming extremely underpaid or overpaid compared to the market.
- There will be fewer future complications. If pay scales are not implemented when there are only 10 employees in the company, it will become a nightmare to implement when there are 100. On top of that, Employee morale will be a nightmare with changing everyone’s income to fit within a grade.
- Company financials will be healthy. Your accountant will one day thank you for this.
Keep in mind that pay scales are always adjustable. Once a pay scale has been established, it’s easy to increase with inflation and as the company becomes more successful.
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Every entrepreneur has gone through it: You are overwhelmed with product orders, inventory counts, making rent for the new office, marketing, and who knows what else. You are finally at the breaking point—you need help.