Employee Salary & Benefits: 10 Tips for Small Businesses (2024)

Employee Salary & Benefits: 10 Tips for Small Businesses (1)

By Monica Mendoza
April 10, 2024

Conventional business wisdom says that offering a competitive compensation package is key to attracting and retaining talent, and this remains largely true to this day. Unfortunately, not all small businesses have the cash flow or reserves needed to reliably offer compensation at the level of larger, more stable competitors. Even if you want to offer the best salary and benefits to your employees, the current business environment may not make it possible.

Fortunately, navigating this dilemma can be made easier by following these clever tips:

Offer Non-Monetary Perks

When it comes to employee benefits, giving cash bonuses isn’t your only option and not always viable. A good alternative is offering non-monetary perks. This will help you conserve your capital, while still encouraging employee loyalty. Look into offering such perks as flexible or hybrid work arrangements or free breakfasts at the office. These benefits tend to be more sustainable than giving cash outright and can still serve to boost employee morale.

Look into Salary Advances and Employee Loans

If you truly want to give our cash-based benefits, you may want to consider allowing salary advances or setting up an employee loans program. These benefits may impact cash flow somewhat, but they shouldn’t have a huge effect on a business’s bottom line—provided the employees pay up, of course.

For easier tracking, these benefits can be disbursed through the same system as the employees’ regular salaries. When updating theirpayroll system, Philippines-based small businesses should look at flexible solutions like Maya Disbursements that could effortlessly accommodate these perks.

Discontinue Underutilized Benefits

Sometimes, benefits that look good on paper are unsustainable for a business. For instance, free food at the office seems impressive, but if employees aren’t eating it, it won’t make sense to continue this benefit. In these cases, you may want to replace the benefit with something that promises better employee utilization.

Prioritize Essential Benefits

It’s become fashionable for small businesses to offer a wide variety of unusual benefits that set them apart from their competitors, such as free gym memberships or having a pet-friendly office. While a diverse benefits package can look great on a job listing, experienced employees—the ones you need the most—are going to be focused on the essentials like health insurance, retirement plans, and paid time off.

Knowing this, it makes sense to prioritize these core benefits rather than trendy ones that probably won’t be fully utilized. In other words, don’t buy that break room foosball table and instead use the cash for something more meaningful.

Negotiate with Benefit Vendors

The larger your business gets, the more room it has to negotiate with insurers and other benefits vendors. Take the time each year to discuss plans with your vendors to secure competitive rates for insurance plans, retirement accounts, and other employee benefits. To improve your position during negotiations, explore different providers and leverage your learnings to negotiate favorable terms.

Offer a Direct Stake in the Business

If your business does not have a stable cash flow, flexible benefits that directly correlate with your growth as a company can be a good way to retain top performers. Some flexible compensation options you can try including bonuses, profit-sharing, or stock options.

Implement Performance-Based Pay

Performance-based pay structures can be used to reward top performers while conserving your capital. As with offering business shares, pegging bonuses and salary increases to predefined metrics can also elicit a shared feeling of stewardship over your business among your employees.

Keep in mind, though, that performance-based pay must be fair and transparent. If the system is being run in a way that makes it impossible to get a decent raise, it will eventually engender resentment and cynicism among your employees.

Educate Employees on Benefits

If your employees don’t understand the implications of the benefits they receive or are supposed to receive, they will not appreciate their value. In turn, this will make the benefits you offer ineffective at encouraging loyalty and probably useless at attracting people to your organization. For these reasons, you need to set aside time to educate employees about the value of their entire compensation package.

It’s not enough to provide resources in a shared folder, either. Education on benefits should be done upon onboarding new employees and refresher needs to be scheduled at least annually to remind your workforce about what’s available. Whenever there’s a change in benefits, block off some time to discuss them. Importantly, you must be ready to provide information on key benefits like health insurance and retirement planning.

Seek Professional Advice

Budgeting employee salary and benefits isn’t something that can be easily mastered. Fortunately, there are professional HR and payroll consultants who can help you develop a strategy that matches your business’s goals and financial constraints. Their services won’t come for free, but the potential savings and the improvements in recruitment and employee relations make engaging with these professionals well worth considering.

Smarter Compensation Means Sustainable Small Biz Success

Small businesses generally operate with many constraints but, with some creativity, most can provide competitive compensation and benefits without endangering their financial position. The benefits described here might not always be as effective as an outright raise, but they do give smaller businesses the ability to conserve cash reserves while still providing potent recruitment and retention capabilities. Ultimately, the conservation of both cash reserves and talent can pave the way for business longevity along with a much bigger pie for all the business’s stakeholders to partake in.

Monica Mendoza

Monica Mendozais a content writer and marketing professional. She spends a lot of time studying how technology continues to transform lifestyles and communities. Outside the office, she keeps herself busy by staying up to date with the latest fashion trends and reading about the newest gadgets out on the market.

monica.mendoza00111@gmail.com
https://cllax.com/author/monica-mendoza

Employee Salary & Benefits: 10 Tips for Small Businesses (2)

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Employee Salary & Benefits: 10 Tips for Small Businesses (3)

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Employee Salary & Benefits: 10 Tips for Small Businesses (2024)

FAQs

Employee Salary & Benefits: 10 Tips for Small Businesses? ›

Standard benefits consist of health, dental, vision and retirement plans. In order to appeal to a generational workforce, however, employers may need to also offer voluntary benefits that can be customized to meet employee needs at different life stages.

What benefits do most small businesses offer? ›

Standard benefits consist of health, dental, vision and retirement plans. In order to appeal to a generational workforce, however, employers may need to also offer voluntary benefits that can be customized to meet employee needs at different life stages.

How do you pay your employees in a small business? ›

How do I pay my employees?
  1. Collect employee information and payroll forms.
  2. Calculate gross pay based on their hourly rate and hours worked.
  3. Determine employee net pay by deducting the required taxes.
  4. Pay your employees by check or direct deposit.
  5. File payroll taxes.
  6. Document and maintain your payroll records.
May 14, 2024

How to determine what to pay an employee? ›

How much should I pay my employees?
  1. Deciding on pay is a balancing act.
  2. Work out what to pay your employees in five steps.
  3. Write an accurate job description.
  4. Get up-to-date salary data.
  5. Find out a candidate's pay expectations.
  6. Calculate what you can afford.
  7. Make an offer.
  8. Put your best foot forward.

How do new businesses afford to pay employees? ›

Use equity and stock options. Another alternative is to offer employees equity grants or stock options instead of cash. This is only a viable alternative for companies that have realistic prospects for liquidity; in other words, don't offer stock options if you don't think they'll be worth anything.

What is an example of salary and benefits? ›

What would be an example of an employee's compensation and benefits? An example of an employee's compensation and benefits would be a $30,000 per year salary, a health insurance plan, 3 weeks of paid annual leave, a free gym membership, and access to free snacks and meals in the office canteen.

What are three 3 benefits of owning a small business? ›

Advantages of Small Business Ownership
  • Independence. As a business owner, you're your own boss. ...
  • Lifestyle. Owning a small business gives you certain lifestyle advantages. ...
  • Financial rewards. ...
  • Learning opportunities. ...
  • Creative freedom and personal satisfaction.

How to hire good employees for a small business? ›

Conduct one-on-one interviews with applicants who show a clear passion for your mission. Remember, small business candidates care more about purpose and challenge than they do about compensation. Interview your top applicants as a team.

What is the easiest way to do payroll for a small business? ›

How to Do Payroll for a Small Business
  1. Step 1: Find your employer identification number. ...
  2. Step 2: Collect employee tax information. ...
  3. Step 3: Choose a payroll schedule. ...
  4. Step 4: Calculate gross pay. ...
  5. Step 5: Determine deductions, allowances and other withholdings. ...
  6. Step 6: Calculate net pay and pay your employees.
Feb 13, 2024

How to set up salary for employees? ›

Check out these 8 steps for developing a formal salary structure:
  1. Do You Want to Lead, Lag or Match? ...
  2. Review Job Descriptions. ...
  3. Rank the Job Positions. ...
  4. Conduct Market Research. ...
  5. Create Pay Grades. ...
  6. Create Salary Ranges within Pay Grades. ...
  7. Make Adjustments for Existing Employees. ...
  8. Monitor and Update.
Jan 11, 2022

What percentage should payroll be for a small business? ›

How much should you spend on payroll? The general consensus is that payroll should be no more than 20-30% of the company's gross revenue. However, experts say that in certain industries (such as service businesses) payroll costs can be as high as 50%, without harming profitability.

What factors should determine an employee's pay? ›

Ranges are typically created beforehand. This allows an employer to determine the pay rate for employees by evaluating the expectations required for the job. This includes knowledge, skills, abilities, past experience and education. Pay rates can be affected by numerous market and demographic factors.

How to determine a fair salary? ›

These tips can help you determine a fair and accurate salary for your role:
  1. Understand the value of your work. ...
  2. Contact your professional network. ...
  3. Conduct research. ...
  4. Consider the company's pay scale. ...
  5. When the fiscal year ends. ...
  6. When the market rate changes. ...
  7. When you've been making the same pay for over a year.
Oct 5, 2023

What is the best way to pay yourself in a small business? ›

Business owners can pay themselves through a draw, a salary, or a combination method:
  1. A draw is a direct payment from the business to yourself.
  2. A salary goes through the payroll process and taxes are withheld.
  3. A combination method means you take part of your income as salary and part of it as a draw or distribution.
Oct 27, 2023

How to pay employees without payroll? ›

Yes, it's okay to pay your employees in cash if you comply with regulations from the Internal Revenue Service (IRS) and the Department of Labor (DOL). It's also legal to pay your 1099 employees (independent contractors) in cash.

What happens if a business doesn t have enough money to pay employees? ›

If a company finds itself in a situation where it cannot pay its employees, serious issues can arise. Frustrated employees may stop working or threaten legal action. As a company's financial issues deepen, they may consider paying employees under the table, taking out a business loan, or even declaring bankruptcy.

What is one of the biggest advantages that a small business has? ›

One of the biggest advantages that a small business has over a large business is a greater ability to serve specialized markets. One of the biggest advantages that a small business has over a large business is a greater ability to serve specialized markets.

What benefits do small businesses provide our economy? ›

Independent businesses provide their local economies with new jobs, products, revenue, services and more. Small businesses not only contribute economic benefits to their community but also charitable and innovative ones as well. Research shows that 66% of small business owners donate to charity.

What benefits do companies typically offer? ›

Benefits That Are Considered “Industry Standard”
  • Health insurance. Legally, there is no federal law that says companies must offer health insurance to their employees. ...
  • Family and Medical Leave (FMLA) ...
  • Disability Insurance. ...
  • Life Insurance. ...
  • Retirement Savings and Planning. ...
  • Paid Time Off (PTO) ...
  • Stock Options.

What is an advantage of working for a smaller business? ›

Smaller firms typically have less red tape and protocols to wade through when it comes to innovation. This often means projects are completed more quickly and with less frustration. You likely won't need to seek approval at every step, and you'll gain some fantastic insight and hands-on experience along the way.

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