Smart Tips for Handling Employee Salaries

Salaries are a tough expense for most businesses. You want to hold them down but reining them in too tightly doesn’t always work well. Good employees can find work elsewhere and replacing them can cost a bundle. So, if you’re in a spot where every salary dollar counts, here are eight ideas for getting the biggest bang for your buck.

Remember that most people work not only because they need to earn money, but because they take satisfaction from making a contribution. You don’t want to be condescending or phony. Be generous with encouragement and praise — it doesn’t cost anything.

• Do research. Make sure your salaries are in the average range. If you pay too little, your recruitment and training costs will be out of line because you won’t be able to hold onto people. It doesn’t pay to constantly lose people because they can make $2,000 more down the street. Salary.com offers a free search engine that allows employers and employees to research compensation information compiled from various industry surveys. Other resources include the federal government and trade organizations within your industry.

• Give bonuses, not large increases. That way, the base salary stays the same, but the total package is competitive. If your company does well, the staff does well too — a concept that seems fair to employees.

• Be flexible. Big corporations may not be able to write their policies around their employees’ needs, but smaller firms can afford to accommodate special situations. Don’t worry too much about setting precedents. Employees will understand when you cut a special deal as long as a similar deal is available if they need it. In return for flexibility, many employees may be willing to accept cash compensation that is less than they could get someplace else.

• Be willing to hire smart, less-experienced people who need some training, even if you think they won’t stay around long. It’s better to have passing brilliance than permanent mediocrity.

• Get rid of any caps in commission-based jobs. Everybody wins if you set up a system so that the more people sell, the more money they make.

• Consider outsourcing. But remember that outsourcing can reduce commitment, consistency and control. Make sure you’re not giving up more than you should.

• Move things around. Allocate resources to ensure that every employee’s talents and abilities are being used to the maximum. Many people are mission driven. If they feel they are indispensable, they’ll behave that way.

Share the risk. Talk to employees often and honestly. Let them know when the company is doing well and when things are going badly. Employees who understand the risks are more likely to share their ideas for solutions. They’ll be willing to ride out the bad times because they feel part of the operation.