A salary is key to retaining, attracting, and rewarding talent. It’s one of the main reasons many of us apply for a vacancy.
For many businesses, paying salaries is one of their biggest outgoings. it’s vital you pay your employees properly, failure to do so will leave you with avoidable issues such as wage disputes and potentially a breach of contract.
In this guide, we’ll discuss what makes a good salary, how to negotiate salary with your employees, and how to calculate a successful pay structure.
What does salary mean?
A salary is the amount of money paid to an employee for the work they do. Most salaries are paid on a weekly, bi-weekly or semi-monthly basis. Some companies may also pay salaries on a monthly schedule.
Some salaries are paid on a weekly or bi-weekly schedule. On a job posting, the salary is expressed as an annual sum.
In order to run a successful paying system within your business, you need to choose a structure in which you will pay your employees. If you choose a salary pay structure, understand what’s included.
A pay structure is more than just an annual salary. It includes basic pay, any variables like bonuses, commission, overtime, and unsociable pay.
What is a good salary?
What makes a good salary is an open question, a salary could be good for one job and bad for another.
You need to ensure that the salary you offer matches, or is higher, than industry salaries in your local area. Wage comparison is a big thing for some employees, if they feel their wage doesn’t match similar roles at other companies.
A common way to create a successful wage system is by implementing a salary grading structure. Most salaries are offered on someone’s’ education and work experience, whereas a salary grading system places an employee salary on a particular level depending on their experience.
By using a salary grading structure, it shows a clear progression pathway for employees if they’re successful in the role. This can make the role more attractive for prospective employees.
Inflation and salary increase
Inflation is one of the key players in any economy. It’s important that you understand how this can affect you when paying your staff.
Inflation is an increase in the cost of living, usually caused by rising prices. It’s key that as an employer, you adjust your salaries over time so your employees can have the same standard of living.
Failure to do so, could end with your employees looking elsewhere for employment.
How to calculate annual salary
When it comes to paying your employees, you need to know how to calculate salaries correctly. Once you have the salaried amount for your employee, you can then work out and remove payroll deductions like income tax and pension contributions.
Use the following calculation when working out a salary: (Number of hours worked in a week X hourly wage) X 52
Multiply the numbers of hours worked in a week by the hourly wage, then multiply by 52.
For example, if the hourly wage is $20 and hours worked is 37.5 over a 52-week period, the annual salary is $39,000.
How to negotiate salary
From time-to-time you may offer one of your employees a promotion. In most cases, this will come with a pay raise.
As mentioned previously, before entering salary discussion, you need to familiarize yourself with industry salary trends.
You also need to consider the responsibilities that the new role requires and ensure the salary matches the company pay structure.
Make sure the salary discussion includes all aspects of your pay and benefits package:
- Base pay.
- Any bonus or commission pay.
- Mandatory benefits.
- Leave entitlements.
- Any non-mandatory benefits.
How to calculate salary increase percentage
You may have an employee who asks for a pay rise following a good year of performance and target hitting. When giving a raise, you must calculate any salary increase percentage correctly.
Use the following calculation (using an example salary increase of 10% on $28,000):
- Divide 10 by 100 to find the decimal place = 0.10.
- Multiply 0.10 by original wage $28,000 = $2800.
- Add $28,000 and $2800 = $30,800.
Get help with paying salaries today with BrightHR
If you need any assistance with paying employees’ salaries, BrightHR has a range of tools which will help simplify the salary process. Making sure you don’t lose your staff and attract the best on offer.
Our payroll navigator will help you to manage your employee pay, creating payroll reports in seconds.