Choosing the right salary for a new hire is a crucial step that can significantly impact both your budget and your ability to attract top talent. Whether you’re a solopreneur or managing a growing team, balancing the needs of the budget, the market, and the candidate’s qualifications can feel overwhelming. That's where we come in.
Here’s a peek into our approach to helping clients make informed decisions on how to figure out what salary to offer new hires:
Step 1: Budgeting 💰
We start by evaluating the cost of the new hire and how it fits within the overall budget. A typical example might be estimating a salary around $100k and asking key questions like:
How does this compare to existing team salaries?
What effect will this new hire have on additional expenses such as payroll taxes, benefits, and other per-employee costs?
What will the profit margin look like after this hire is included?
This budgeting process ensures that the salary is sustainable and aligned with the company’s financial goals before proceeding further.
Step 2: Forecast 📊
Next, we examine the forecast to see if the business can truly afford the salary for the hire.
This involves looking at:
Expected revenue: What’s in the pipeline and what invoices are expected in the near future?
Necessity: Is the role critical to the business's operations at this stage?
Confirming that the role is both necessary and affordable based on future projections ensures the business owner can move forward with confidence, knowing they can support the hire financially.
Step 3: Reasonable Compensation Analysis 💼
After a candidate is identified, we conduct a reasonable compensation analysis to ensure the salary is competitive and fair.
Our analysis includes:
Market rate: What is the salary for others in the industry and location with similar job titles?
Compilation rate: How would the tasks of the new hire break down if outsourced, and what would that cost total?
By using this dual approach, we provide a well-informed salary range for our clients to ensure the offer is competitive while fitting within the company’s financial structure.
Step 4: Customization ✨
Finally, we customize the salary offer based on both the budget and the candidate’s qualifications. With the groundwork laid through budgeting, forecasting, and compensation analysis, we help our clients make salary decisions that are tailored to their specific needs.
The Result: Our clients feel confident in offering a salary that’s fair, competitive, and financially viable for their business. And candidates feel valued, knowing the offer aligns with market standards and reflects the full scope of their role. This balance helps attract and retain top talent, ensuring a win-win for both the company and the new hire.
How We Can Help You
If you’re a firm or small business owner that's looking to grow your team, managing the financials around hiring can be daunting. But you don’t have to do it alone. Our team can help you navigate the budgeting, forecasting, and compensation analysis necessary to make informed hiring decisions.
Let us handle the numbers, so you can focus on what matters—growing your business. Check out our services to learn more about how we serve our clients. We look forward to the opportunity to work with you!
👋🏾 We’re Little Fish Accounting, a firm that goes beyond the numbers to provide concierge-level care. Our advisory services enables our clients to make strategic decisions for their business, achieving big results with small teams. Interested in learning more? Check out our suite of service offerings.
We also have a podcast, Build to Enough, where we explore practices for sustainably building a business that is aligned with your purpose and values. Let us help you to redefine what success looks like. For more, check out our services below.
💼 Our Services |https://www.littlefishaccounting.com/services
🎙 Build to Enough Podcast | www.littlefishaccounting.com/podcast
DISCLAIMER: We are accountants but we aren't your accountant. For tailored guidance on your individual accounting and tax matters, it's best to consult with a professional. They can provide personalized advice that suits your unique situation.
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