Going Rate Review
Depending on what you are trying to achieve with your wage and salary scales, you can choose from a number of compensation strategies. These include:
Competitive compensation – people get paid the “going rate” or a rate that is similar to that paid to other workers that are doing a similar job in the industry or in the area.
Retention-based compensation – the longer the employee stays, the more they earn; this may include longevity bonuses at certain intervals in time; for example, 6 months, 1 year, 5 years, etc.
Performance based compensation – people get paid based on how well the individual or the team performs.
You could choose one of those strategies or combine them to make your strategy more attractive to the applicants you are aiming to attract. For example, if you operate a hotel you would certainly need to pay your employees at least as much as other tourism establishments in the area. If there is a high demand for workers in the position you are trying to fill, or if you are losing workers to other businesses, you will probably need to pay those workers at the higher end of the scale in order to attract and keep them. If that is the case, you could also consider combining some performance based incentives to give your employees the opportunity to earn more money by improving your bottom line.
Going Rate Review
If you want to remain competitive, it is a good idea to review your wage and salary scales at least once a year. While increasing pay rates annually is not a requirement, it is a common practice. If others in your industry are following this practice, you might need to do so as well. When you are setting base salaries and salary ranges, it is important to leave some room to move. Don’t assume you have to pay more than your competitors. Most employees want to be treated fairly. If you were to offer higher rates of pay when recruiting new employees, only to have other companies increase their rates to equal yours in the next year, your employees would likely perceive your company as falling behind the competition. You might consider some special arrangements that would give your employees extra benefits and increase your market position!
Here are some pointers to help you determine how you should pay your employees:
Calculating Employee Pay Levels
Figure out what wages are being paid for similar jobs in your area. The following are some suggestions for doing this:
- Check the local newspapers for job postings in your industry and your area.
- Check the online job sites for postings of similar positions.
- Ask some of the other business owners – you may be surprised with their willingness to share information.
Compare the job with other positions in your company. You will need to consider the level of responsibility, education, and experience required to do different jobs. Make sure that the pay for similar jobs is about the same throughout the company.
Check the following websites for average rates of pay by occupation in Prince Edward Island and in Canada. www.workingincanada.gc.ca/home-eng.do?lang=eng