Figuring out the best tactics and strategies to use when setting up a compensation structure for your small business can be one of the more difficult tasks that you need to take on. It's important to do this from the beginning, though, so that you have a basic guide in place to follow even as your business grows. The following three are things you need to consider when determining your compensation strategy.

#1: Learn the industry standards

It's difficult to attract good employees with the right skill set if your compensation package is well below industry standard. Find out what similar jobs in your area are paying and then use this information to set up a pay range. Generally, as a newer small business you will want to begin your offers on the lower end of the scale. This gives room for bargaining with the right employee, or for awarding later raises if your budget remains static for one or more years. Keep in mind that even a lower compensation must adhere to certain legal standards, such as minimum wage, fair pay, and overtime wage laws. There are federal standards, but many states also have their own more stringent standards that you must be aware of.

#2: Set a budget

Your overall compensation package must fit into your operating budget since employee paychecks must always clear the bank. Be realistic with your budget. As a new business, you may need to limit the amount of staff you bring on or you may need to opt for less experienced staff on the lower end of the standard so that compensation rates stay within the necessary confines. Compensation should be reviewed annually only after the annual budget review, and then raised to fit a new budget when possible.

#3: Figure out the fringe benefits

Not all compensation comes in the form of a salary or a paycheck. What other forms of compensation will you provide or are you legally obligated to provide? This includes things like sick and personal days, vacation time, health benefits, or even employee discount and bonus programs. Non-monetary benefits can also be part of the compensation package, such as providing the ability to telecommute or supplying a company car. These benefits all need to be added into your payroll budget and figured in as part of the compensation.

If you are having trouble, talk with a payroll consultant for more help. For more information, contact a service such as Fox Lawson & Associates, A Division of Gallagher Benefit Services Inc.