Experience Files

Understanding Market Rates and Responsibilities

What someone pays in New York will be vastly different from compensation in Colorado. Location plays a huge role. Furthermore, two companies might be hiring for the "same" role, but the responsibilities could differ significantly, impacting the appropriate wage. Don't assume another company's pay scale directly translates to yours without understanding the full scope of the role they're expected to fill.

Avoiding Wage Compression and Strategic Raises

If you're looking to offer a higher starting wage to attract new talent, be cautious of wage compression. This happens when new hires are paid more or similarly to existing, more experienced employees. To avoid demotivating your current team, consider adjusting pay for all employees when you introduce higher starting wages.

To gauge your compensation against the market, check websites like Indeed for job postings in your area. Many sites even provide salary ranges for specific roles in your city or state, giving you a solid benchmark.

If an employee requests a raise that pushes them above the typical market range for their current role, consider if a promotion to a role with greater responsibility is appropriate. This places them in a position where the higher compensation aligns with the market rate for that new role. While it might seem generous to pay an employee well above market simply because you can afford it, it's not always beneficial for either party. If that employee were to lose their job, it could be incredibly difficult for them to find comparable employment, potentially causing significant financial hardship for them.

Performance Bonuses and Handling Outside Offers

Consider implementing performance bonuses as an alternative or supplement to base wage increases. These should be tied to Key Performance Indicators (KPIs) that genuinely encourage specific behaviors and results, rather than just overall revenue. Tying bonuses to clear performance metrics ensures they motivate your team effectively.

Finally, if an employee comes to you with an ultimatum like, "I want $45 an hour; Wally's Restoration offered me that much," it's wise to ask for the offer letter. Based on personal experience, if they produce one, it's prudent to contact the other company to verify. Sadly, there have been instances where "offer letters" on company letterhead turned out to be completely fabricated.