Wages

 What is the Difference Between the Top Wage Earner

and the Bottom Wage Earner at Your Business?

 

The difference in wages from the top wage earner to the bottom wager earner is important for two reasons.  The main reason a small business should evaluate this portion of their compensation package is to make sure that the lower wage earners can perceive the difference in workload, responsibilities, and experience of their higher wage earning counterparts.  If the higher wage earners aren’t perceived as having more responsibility, longer hours, or more experience than the lower wage earners hostility may arise. 

 If the lower wage earners in a business can see that they have an opportunity to achieve higher wages through more work, responsibility and experience they will be more likely to stay with the company.  This will in turn save the company hiring costs and the associated training expenses.  In general there will be several levels of wages in most small businesses and most employees understand this.  Just make sure that the wages and perceived workload are balanced for all wage levels.  Your business may decide to use a formula or diagram to determine wages such as the one below:

 Sample Wage Formula: 

 Base + Experience Component + Responsibility Component=Wage

 In the above formula you would start with a base pay, whether it be the federal minimum wage or some other figure and then add the other components.  For example you may want to at say $1 per hour for each year of experience that the prospect or employee has in the field for the experience component.  The responsibility component may be determined by either direct employee reports which may be worth $.25 each per hour or by specific responsibilities which may be worth $.50 an hour, it can also be a combination of both direct reports and responsibilities.

 

 

From the above diagram you can see, and more importantly your employees can see, that as responsibility and experience grow so too do wages.  But as the wages, experience and responsibility grow the opportunities for growth and advancement become fewer because there are fewer management and leadership positions available as one “climbs the ladder” and therefore, fewer opportunities to achieve a new level of responsibility. 

 In order to keep peace within the business between the upper and lower wage earners it is always a good idea to keep salary and wage information confidential.  Another important thing to consider when comparing the difference between the upper and lower wage earners is to make sure that the business is receiving everything it should be receiving from all employees.  Using different levels of wages in a business is a good way to reward good employees and to show all employees that the business is willing to invest in their success.  

Filed Under General Business, Human Resources | 1 Comment  | March 20th, 2010

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