How Much Should I Pay My Employees?
This article was last edited on 6/24/2020. For updated information on state minimum wage laws, visit https://www.dol.gov/agencies/whd/minimum-wage/state.
When you’re hiring your first employee, you might not know how much to pay them. The amount you pay your workers will impact your bottom line, ability to attract top talent, and your reputation as an employer. Follow these four steps to help you determine how much to pay your team.
1. Understand what position you’re hiring
Before you set a salary or hourly rate for a new staff member, make sure you know what role you expect them to play in your company. Start by writing a detailed job description to outline precisely what you expect your new employee to do. That will help you make sure you’re paying them fairly.
2. Comply with minimum wage laws
If your workers are protected by the Fair Labor Standards Act (FLSA), you must pay them minimum wage or higher.
Some people, though, might be exempt from federal minimum wage laws, including:
- tipped employees
- workers with disabilities
- full-time students
- children under 20 years old
- high school students enrolled in vocational schools
Although the federal minimum wage is currently $7.25 per hour, your state may have a higher minimum rate you’ll need to follow.
|California||$12.00 or $13.002|
|Minnesota||$8.15 or $10.003|
|Montana||$8.65 or $4.004|
|Nevada||$9.00 or $8.005|
|New York||$11.80, $13.00, or $15.006|
|Ohio||$8.70 or $7.257|
|Oklahoma||$7.25 or $2.008|
3. Decide the most you’re willing to pay
Set a pay range before you start the hiring process, so you know how much you’re willing to pay if a candidate wants to negotiate their salary. Consider how much value the new position will add to your company either by bringing in revenue or saving you money.
For example, if you’re hiring a salesperson, you can estimate how much money through bring in through new sales. If you’re bringing on an office administrator, you’ll need to think about how much time and money they’ll save you.
4. Consider the market
The job market often sets expectations for how much particular positions will pay. Most candidates will expect you to match or exceed the average salary for your area (unless you provide excellent benefits).
You can find market rates by using sites like Salary.com or PayScale, which will allow you to search by job title and location. Searching by location is especially important because the market rate for a position in California may be vastly different than in Georgia. In Georgia, the average salary for a job in Atlanta will likely be different than in Augusta.
1Alabama, Louisiana, Mississippi, South Carolina, and Tennessee: If your state does not have minimum wage laws, follow federal standards.
2 California: If you have 25 employees or fewer, minimum wage is $12.00 per hour. Otherwise, minimum wage is $13.00 per hour.
3 Minnesota: If your annual revenue is $500,000 or more, minimum wage is $10.00 per hour. Otherwise, minimum wage is $8.15 per hour.
4 Montana: If your company is not covered by FLSA with gross annual sales of $110,000 or less, minimum wage is $4.00 per hour. Otherwise, minimum wage is $8.65 per hour.
5Nevada: If you offer qualified health insurance benefits, minimum wage is $8.00 per hour. Otherwise, minimum wage is $9.00 per hour.
6 New York: For workers in Long Island or Westchester, minimum wage is $13.00 per hour. Employees in New York City are entitled to $15.00 per hour. All other New York employees are entitled to $11.80 per hour.
7 Ohio: If your annual gross receipts are $305,000 or more, minimum wage is $8.70 per hour. Otherwise, minimum wage is $7.25 per hour.
8 Oklahoma: If you have ten or more full-time employees at one location and/or have annual gross sales over $100,000, minimum wage is $7.25 per hour. Otherwise, minimum wage is $2.00 per hour.