The Best Way to Determine Employee Salary Amount

Table of Content

• What is Employee Salary?
• How often should a salary be paid?
• How should a salary be paid?
• 5 Step to Determine Employee Salary
  • 1. Do Some Research
  • 2. Let Employees Negotiate their Salary
  • 3. Adjust Salary Based on The Living Cost of The Area
  • 4. Make Sure your Company Can Afford the Salary
  • 5. Monitor their Contribution
• Conclusion

What is Employee Salary?

Employee salary refers to the financial compensation provided by an employer to an individual in exchange for their services and contributions within an organization. It represents the agreed-upon amount that an employee receives on a regular basis, typically monthly or biweekly, for their work and dedication. Employee salaries are often determined based on factors such as job responsibilities, skills, experience, market demand, and company policies.

Salaries can vary widely across different industries, job roles, and geographical locations. They serve as a primary source of income for employees and are crucial in meeting their financial needs and maintaining their standard of living. Employee salaries can include various components, such as base pay, bonuses, incentives, allowances, and benefits, depending on the employer’s compensation structure

How often should a salary be paid?

The frequency at which a salary should be paid typically depends on local labor laws, company policies, and industry standards. In many countries, salaries are commonly paid on a monthly or biweekly basis. Monthly payment schedules are prevalent in numerous regions worldwide, where employees receive their salary once a month, usually on a specific date. Some organizations may opt for different payment frequencies, such as weekly or semi-monthly, to align with their operational needs or employee preferences.

How should a salary be paid?

A reliable and efficient method for paying salaries is through the use of a payroll system. A payroll system automates the calculation and processing of employee salaries, ensuring accuracy and timeliness. It factors in various elements, including base pay, overtime, deductions, and taxes, to generate accurate paychecks or direct deposits. By implementing a payroll system, organizations can streamline their salary payment process, save time, and reduce errors.

Payroll systems can integrate with other HR and accounting software, allowing for seamless data synchronization and generating comprehensive reports for record-keeping and compliance purposes. Additionally, payroll systems often offer features such as tax filing assistance, benefits administration, and leave management.

5 Step to Determine Employee Salary

Determining employee salaries is a crucial aspect of managing a workforce and ensuring fair compensation. While the process may vary depending on the organization and industry, there are typically five essential steps involved in determining employee salaries. By following these steps, organizations can establish a transparent and equitable salary structure.

1. Do Some Research

The easiest way to determine your employee salary amount is by researching the amount of salary of that position in another company. Make sure your reference company location is not too far from your company location.

For example, do not compare the salary for a marketing position in a company located in Vietnam with those in Singapore. The reason is living expenses. You certainly don’t want to give a salary that is too high or too low because it is not in accordance with your region’s living expenses, right?

Another reason is competition. Giving a low salary can result in your employee moving to a competitor company that might be able to provide a higher salary.

2. Let Employees Negotiate their Salary

During job interviews, salary negotiations frequently happen. However, there are very few companies that allow employees to negotiate salaries, even though they have worked for years.

It’s best to let your loyal employees negotiate their salary. This can increase the morale of your employees and make them feel appreciated while working in your company.

Not only that but letting your employee negotiate their salary is useful for evaluating the material of that employee. Salary negotiations create opportunities to assess the performance of the employee. You can then improve employee performance through competency management and training. 

3. Adjust Salary Based on The Living Cost of The Area

As we discussed earlier, you have to adjust the salary based on the living cost of where your office is located. This will affect the happiness of employees working in your company.

A small salary will make your job offer less attractive among job seekers, and too large will definitely harm your company. Adjust the salary component to the standard living costs in your area, so you will ensure the welfare of your employees.

Welfare does not only make employees feel comfortable working with you but will also increase their productivity. In the end, your company will feel the benefit.

4. Make Sure your Company Can Afford the Salary

Having multitasker employees is an advantage indeed. The problem is, that such employees often ask for a high salary. This is why it’s important to make sure that your company can afford to pay the requested salary.

To overcome this, you can set the top and bottom limits of the employee’s salary. You can use these limits as a benchmark when recruiting employees. Even if you find a multitalented employee but the salary requested exceeds the top limit, don’t force yourself to recruit him/her, and vice versa. Do not give the employee a salary below the bottom limit you have previously set.

5. Monitor their Contribution

The employee’s contributions to the company will greatly determine how much salary they receive. It’s possible that the employee position in the company doesn’t directly bring profits to the company, but has a big contribution to increasing the productivity of other employees. This is an important point in determining the salary.

Monitoring the contributions of probation employees is also an important thing to do. If during the probation the employee is finished his/her work and responsibilities or has above-average performance, you can consider raising his/her salary after he/she has passed the trial period.

Conclusion

The five ways above are only a small part of many other aspects that you have to consider before determining employee wages. However, the five methods above are the most common things done by HR staff in various countries, including Singapore.

To make it easier for HRD to manage employee administration, especially in companies with a large number of employees, you can use the help of the HRM System from HashMicro. Calculate salaries and PPh 21, manage leave and attendance lists, reimbursement processes, and other operational activities with HR Software and the most complete payroll application for enterprises in Indonesia, try the free demo today.