Editorial: What to pay a new employee

As hiring picks up in 2015, make sure you are taking all factors into consideration, Mark Zweig writes. Some years ago, I got a call from a good client and friend of mine. He ran a good-sized A/E firm in the Midwest and needed some help with recruiting. They desperately required a strong engineering project manager with a healthcare HVAC design background. He wasn’t happy with the capabilities of the five other PMs they had with HVAC backgrounds. None of them were strong enough to handle the big project they’d just landed (according to him). We discussed all the requirements for the job and then I asked him what they would be willing to pay. His response was $90,000 max base pay because that’s how much they paid the other people there (the ones he wasn’t happy with, mind you!). I asked him why he thought we would be able to find someone better than the five he already had and entice him or her away from their present employer for the same pay he’s giving others who aren’t as good. He didn’t really realize the low probability of that occurring until I pointed it out to him! Determining what to pay someone you’re trying to hire is always a thorny subject. What they make currently, what others in the firm make, what their expectations are, relative cost of living where they are now versus where you will put them – there are many factors to consider. Finding out what they currently make is crucial but many firms don’t even ask for it. The best way is to just come out and ask. When the person says, “I make $100K,” the next questions out of your mouth should be, “How does that break down? What portion of that is base pay? Bonus? Overtime? Benefits?” You may very well find out they actually earn a base salary of $80K, which could radically affect your assessment of that person’s value to you and prospects of accepting an offer of $95K. Looking at your existing staff honestly is another factor. If you love them you’d better consider the risk of bringing someone in from outside at a higher price. If you think you need to upgrade, be ready to pay a higher price than what you’re paying everyone else now. And here’s the truth of it: It will be hard to hire someone as good as the people you have now without paying that person more than you pay everyone else because their current employer probably values them similarly to how you value your other similar-capability staffers. Salary surveys are one way to get some external data reference beyond what the person says they are currently making and beyond what you are currently paying your similar people. But beware. The geographic groupings they put people in may not make sense or reflect where you are. “Southern States,” for example, would include Atlanta but could also include Greenwood, Miss. The price tags for people with similar backgrounds could be quite different in those two locations. So looking at what people with an architectural degree, registration, and 10 years of experience “earn” could be an apples to oranges comparison. Cost of living is yet another factor. Yes, it is a lot more expensive to live in San Francisco than it is the DFW area. But “no,” the salaries in the Bay Area are not correspondingly higher over the DFW area. So salaries do NOT automatically go up in higher cost areas. Yet, this is bound to be a factor for anyone considering a new job. There are many factors to consider in what to pay someone. We haven’t even discussed bonuses, benefits, and relocation packages. The best companies are going to be throwing all kinds of “deals” out there but will pay the greatest attention to base pay. Base pay is what someone can count on and is always the most important number in anyone’s compensation package. Not to mention higher salaries make it harder for people to leave your employ because other companies can’t afford ’em. My guess is you’ll be doing a lot of hiring in 2015. I hope this helps! Mark Zweig is the chairman and CEO of Zweig Group. Contact him with questions or comments at mzweig@zweiggroup.com.