How Much to Pay New Hires in 2011

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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Ready to make some full-time hires in 2011 so you can grow your business? You’re not alone. Several recent surveys show that small businesses are thinking about hiring once again.

Like many entrepreneurs, you may be wondering how much salary to offer in today’s job market. Overpay new employees, and you’ll soon find yourself with unsustainable overhead — especially if the economy falters. Shortchange your recruits, and you may breed resentment. Here is some advice from compensation experts on how to strike a balance.

Do a Reality Check

While you might dream of building a team that has worked at multinational corporations, doing so may not be necessary for your small business. “As a company you need to look at what you can afford and what level person you need for a position,” says Rob Wilson, president of Employco USA, a human resources outsourcing firm based in Westmont, Ill.

That said, depending on your industry and region, it is still possible in today’s job market to attract talented candidates who earned more elsewhere but want benefits that a small firm may offer, like better work-life balance, says Wilson. “At the mid-level, you’re seeing huge salary changes for people,” he says. In one search to fill a human resources position paying $75,000, he recently saw applications from candidates who had earned around $150,000 previously. Bear in mind that if you hire people for a fraction of their previous salaries, you may lose them once the job market picks up, says Wilson.

Know the Going Rate

Wilson recommends looking at Salary.com to learn current salaries in your industry and region. Other good sources of information on compensation are trade associations. Resources include the Society for Human Resource Management, which researches salary trends, and WorldatWork, a not-for-profit focused on global human resources issues, says Priya Kapila, a St. Louis-based consultant at CBIZ Human Capital Services, which does human resources consulting.

Still not sure how much to pay? There are many human resources consultancies that can help you. Ask for a “market pay assessment,” advises Kapila. Costs for such a report, says Kapila, range from very minimal to several thousand dollars, depending on your needs and the consultancy’s rates.

Consider Supply and Demand

The unemployment rate among those with a bachelor’s degree or higher was 5% in November 2010; for those with a high school diploma, it was 10%. What does this mean for you? If you need a highly educated, professional-level employee such as an accountant or chief technology officer, be prepared to pay a very competitive salary. “For the C-suite executive, you may really want to target that median competitive pay rate,” says Kapila. “You want someone who is qualified and can start the job running. For a lower-level or support-type position, it may be less important that you’re bringing in the best of the best. You can focus on something lower in the range of what is competitive and reasonable.”