Deciding what to pay your employees

How to decide what to pay employees?

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The more you invest in your employees, the more important it is to hold on to them. As well as being a good employer, this means keeping tabs on what your competitors are offering and making sure that the pay and benefits you offer remain attractive.

 

Employers know all too well that hiring is a time-consuming and expensive business. So, if you have good employees, you definitely want to hold on to them. While keeping up to date with market trends and benchmarking your salaries and benefits against your competitors is key, it’s also important to understand where and how your team members add value to your business. The more you know about their expectations and aspirations, the better you can tailor individual packages. The question is—where to start?

Leverage your payroll information

From a payroll perspective, we believe the first step is to use the information you already have at your fingertips. Your payroll reports reveal a lot about your business. As well as using them to quantify how much you are spending on salaries this year compared to last year, they can help you measure productivity—for example, by looking at how many hours your employees work and whether they are achieving value-adding outcomes or whether you are spending too much on work that does not improve your bottom line. If you notice that employees are doing more overtime than last year, this might suggest you need to invest more resources in a certain area. If you notice that sick leave and absence rates have deteriorated, this could indicate problems in the workplace that need to be addressed.

Understand your finances

Budget constraints obviously need to be taken into account when it comes to deciding what you can afford to pay. It’s worth keeping in mind that non-pay benefits such as flexible working or career advancement opportunities may be more important than a pay rise for some employees.

Review job descriptions

When reviewing your existing team, it’s important to be clear about what each role in your business involves. Ensure that your job descriptions are accurate, up to date and job titles correctly reflect roles. Remember to take experience and qualifications into account when looking at role requirements.

Keep tabs on market forecasts and trends

According to Ibecs latest Pay and HR Trends report, 82% of businesses plan to increase wages in 2024 with an average increase of around 3.8%. External data sources like this can enable you to check if you are in line with other businesses in your sector and help you forecast how trends are likely to affect your payroll costs.

 

At the time of writing, the latest available CSO statistics show that average weekly earnings in Ireland rose 4.6% in Q3 2023. Inflation is currently projected to be somewhere between 2% and 3% this year.

Keep up with legal and regulatory requirements

You also need to keep tabs on legal requirements that could affect your payroll such as the recent increase in the National Minimum Wage, increased parent’s leave, new medical care and domestic abuse leave entitlements, and the enhanced reporting requirements that recently came into force. (For more information on these, see our recent article on Helping your business cope with rising employment costs)

Check salary surveys

Recruitment companies are an excellent source of information, particularly those that specialise in jobs in your sector. Many top recruiters publish annual salary surveys and some also provide online salary calculators which you can use to get an idea of what businesses are paying for specific roles. Other online sources to research include the various jobs websites, LinkedIn Glassdoor, etc.

Understand employee expectations

Remember, your employees may also be watching market trends, particularly if they plan to ask you for a pay rise. When an employee approaches you with a request, it’s a good idea to take time to reflect before making a decision. If you decide to give them the pay rise, you may be able to look for a quid pro quo so that you get something back in terms of increased productivity or the employee taking on additional responsibility. Keep in mind that if you grant one request, other employees on the payroll may also request an increase.

Look for cost-effective alternatives

With rising labour costs eating into the profitability of many businesses this year, rewarding good staff and encouraging them to focus on the areas that add most value to your business has never been more important. Bear in mind that it is sometimes more cost-effective to outsource back-office administration than to try to do everything in-house. A Virtual Finance Department, for example, such as the one we provide here in GroForth, offers cost-effective and efficient administrative support for

 

 

If you would like to find out more about these services and/or if you need help to get more from your existing payroll systems, please get in touch. We’d love to hear from you!

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