boss and employee in meeting
Fair compensation is critical in attracting and keeping talented workers. — Getty Images/Hispanolistic

Fairly compensating your employees is crucial to attracting top talent and retaining loyal employees. In fact, The Predictive Index reports that 66% of companies cite retention as the top reason for having a strong compensation package. Improved hiring, including the ability to pay for in-demand skills, were also identified as important reasons.

Although the benefits of fair compensation are obvious, figuring out what exactly constitutes “fair” can require a bit more nuance. Here are the steps you’ll need to take to determine your employees' pay.

[Read: 8 Simple Ways to Retain Your Best Employees]

Assess the position

While a job title is a good place to start, it alone isn’t enough to determine a starting salary. Jobs with the same title may not necessarily have the same duties or require the same skill sets. Additionally, variables such as industry, business size and even location can all factor into a specific position’s requirements.

Instead, you’ll need to assess each position at the individual level. Making a list of all the job responsibilities can give you a better sense of what the position truly entails, allowing you to better understand how to fairly compensate for those tasks.

Consider experience and education

Once you’ve assessed the responsibilities of the specific job position, consider the experience and education required to fulfill them. Employees may need to have a certain number of months or years of experience with a certain job task or in a certain position and may be used to a certain level of compensation as a result. Some jobs also require advanced degrees or certification programs, which should also be factored into pay rates.

Generally, expected pay rates increase for employees who have more education and experience. Some companies may post minimum qualifications as well as preferred qualifications. This can help broaden an applicant pool, but if you take this route, you’ll likely want to adjust your pay according to the candidate’s experience.

Research wages and industry rates

Compare industry rates based on your job description, including required education and experience. You’ll want to record the lowest, highest and average salaries to get a range of “fair.” Note that compensation may also vary by geographic area, so keep this in mind when conducting your search.

Not sure where to begin your search? Talk to other professionals in your industry regarding pay rates for similar positions. You can also conduct an online search, but keep in mind that not all sources are created equally. Third-party or industry surveys, government data and paid online data sources typically provide reliable information on job-specific salaries. However, free websites offering this data aren’t always validated and reviewed, meaning you might be relying on inaccurate information.

[Read: Top 3 Hiring Trends to Watch]

Compensation doesn’t always have to be exclusively monetary.

Factor in benefits and perks

Compensation doesn’t always have to be exclusively monetary. Benefits such as paid medical or dental coverage and 401k options can be highly attractive and factor into your overall compensation package. Additionally, incorporating professional development and continuing education offerings can also attract and retain quality employees.

Companies are also increasingly offering perks promoting better work-life balance, including remote work, flexible start/end times, tuition reimbursement and paid family leave. These are an especially popular option for small businesses or organizations looking to attract talent on a tighter budget. Try to determine the monetary value of any perks and benefits you’re offering, then use that as an estimation when determining compensation rates.

Set a salary range

Using information from the job description, company benefits and comparable compensation rates, you can now determine a salary range. These numbers will vary based on employee experience and education levels, as well as your industry, geographic location and size of your business.

For example, an entry-level employee who meets the minimum educational requirements may start at $40,000 annually. A candidate with three to five years of experience and a degree might start at $45,000, and one with over five years of experience and advanced education could begin at $50,000.

Negotiate with the employee

Your set salary range is a useful starting point, but you might need to be flexible. The negotiation process is a two-way street, and your candidate may be looking for more than the job posting offers financially.

Consider that your dream candidate walks through the door, but they’re seeking a few thousand dollars more than you typically offer. If you have room in the budget and they’ll provide significant long-term value to your team, it might be worth negotiating that price. Even if you don’t have room in the budget to match their expected salary, offering a greater number than your original range — or even bumping up perks and benefits — may compel your candidate to sign or stay.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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