employee paid more than manager

4 situations that may warrant paying an employee more than yourself

When you’re the owner of a company, it can feel like every salary comes straight out of your pocket. So, what do you do when a prospective hire asks for big bucks, maybe even more than you’re making?

It may be hard to say yes to a salary that’s more than you expected to pay, especially if you’re growing the company and looking to reinvest profits. But the reality is, there are compelling reasons to spend big to sign top talent such as when someone has specialized talent or experience.

Here are four scenarios where you may be out-earned:

1. The employee lives in a city or region that’s much more expensive than yours

If you’re opening a new office in New York, and you’re based in Little Rock, Arkansas, be prepared to pay more than at home. Likewise, if your candidate is a heavy hitter who lives and works in a city with a high cost of living, say a COO in San Francisco, you should be prepared to pay accordingly to acquire that talent. Your trade-off is that you’re not building a network from scratch, but buying into the employee’s established industry knowledge.

2. The position generates revenue

It’s customary for people who bring in money – such as sales reps – to earn commissions on top of their base salary, and those commissions can add up. Remind yourself that signing big checks to your star salesperson is what you want. If you want rain, you’ve got to pay the rainmaker.

3. It’s a job in high demand

The economic theory of supply and demand works for jobs as well as for products.

If there are more positions open than there are qualified candidates, expect to pay more than you have in the past. Currently, this applies to many engineering, accounting and IT positions, among others.

Also keep in mind that you’re likely to lose job candidates as well as current employees if you fail to pay a market-competitive wage.

4. It’s a temporary situation

There may be times when you need to bring in a specialist to handle a specific project for a limited time. Such expert help may be expensive in the short-term but give you long-lasting results. Examples of this may be someone who helps you ready your business for sale or updates a manufacturing process.

Rely on data, not emotion

If you’re still unsure about whether to pay a salary that’s higher than your own, remove your emotions from the equation and look at the data.

Your HR administrator should be able to conduct a salary survey to make sure your applicant’s demands are in line with market conditions. A salary survey compares what companies of similar size pay for a particular position. This data can keep you competitive when hiring.

Consider your total compensation package. Maybe you can sweeten the deal with a more robust benefits package than your competitors.

You can also easily compare differences in cost of living online. The U.S. Department of State provides a list of such sites.

Finally, consider the strategic business need for this employee. If you want the skills and knowledge the job candidate has to offer, and you can quantify the expected results, you may have to pay the price – even if it’s more than you make.

Find more tips for managing your people well. Download our free e-book, How to Develop a Top-notch Workforce That Will Accelerate Your Business.

M
Mike Buonaiuto

Geography is a huge reason. My mother’s company, based in Davie, FL, is expanding into North Carolina and acquired an office in Mississippi…three markets with three pay scales. It’s vital to know the location’s salary scale or else you can deter good talent.