How to decide a fair wage

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Last updated 05:00 26/11/2012

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Small Business

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Q: I've just started a business and am ready to recruit a couple of staff. How do I set a fair wage level for the jobs?

A: For a startup or small enterprise, this is a constant dilemma. A scarcity of cash means you are constantly trying to pay the most effective wage, ie which doesn't break the bank, while being attractive enough against larger businesses who can always pay more.

The question has cottoned onto the absolute right way to look at a salaried position, that of setting a fair rate of pay.

Finding out what industry standards are is not hard, with online guides available on the some job platforms, and recruitment companies often publishing indicator charts. How that translates to something 'fair' for the
individuals you are looking to hire is a whole other question.

If you want to go deeper, companies like Strategic Pay have services around benchmarking roles and staff positions.

Treat new hires like your customers - you want to know what they want, and how you can deliver it. It is rarely just money that drives a person's job decision, as long as they don't have to sell themselves to make ends meet.

Setting a fair pay rate is about knowing what value you need to deliver to employees and how much of that needs to be cash. Other levers to fit to your remuneration package are experience, reputation, culture, employee referrals and perks to name a few.

There is no right answer here, but focus on finding the right people who see the value in being part of your organisation and looking after them in the right way.

- Nick Churchouse is the Venture Manager at Creative HQ, Wellington's entrepreneurship hub and startup incubator.

A: Hire the best person you can afford. A motivated and skilled worker generally outperforms two mediocre employees.

There are remuneration specialists that can size the job and give you ranges, but in your case I would just ask around other business owners to get a sense of "fair pay".

You need to make sure that you pay your staff enough so that they are not constantly thinking they are underpaid.

If it is stretching your budget, split the remuneration between a low base and add a performance payment linked to your business performance. Another option for senior staff is a shareholding in the business if the business reaches a profitability goal.

As a new business, your biggest issue will be affordability. If it is an "exciting" business, do not underestimate your ability to pay under market rate - and top it up with a performance payment based on profitability.

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Many university students are keen to get relevant work experience - many are offering to work for zero pay - I would suggest at least minimum wage.

- Mark Robotham is an SME business adviser. Website: growthmanagement.co.nz

If you want to ask our experts a question, please email jenny.keown@fairfaxmedia.co.nz

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