Wages and compensation

It is important to understand the difference between wages and compensation. Wages refer to the money given to an employee for their work, usually calculated based on an hourly rate or a salary. Compensation can refer to both the money and additional benefits that employees receive, like personal time off or health insurance. It is necessary to consider and award both wages and other compensation to employees to ensure fair pay.  

Salary Benchmarking is an effective way of determining what fair compensation looks like for an open position you are looking to fill. Through this method, you will gather data from similar positions within other organizations and compare the offered wages and compensation to determine what fair compensation looks like for your industry and area. This method is easy for you to do on your own using the following steps:  

Step 1: clarify the job and pool  

It is important to clearly define the position you are hiring for, so both you and potential candidates can understand exactly what you’re looking for in the role. Determine and note the specifics you need, including hours worked, job title, tasks, etc. In addition, decide what you are looking for in an applicant. What kind of background, experience, and skills do you want your new employee to have?  

Next, determine the pool you will be hiring from. This includes the location, education, and stage of career of your ideal candidate. Are you looking for a local, early-career applicant or will you be offering incentive for an experienced director to move to your area? It is important to define both the job and pool in detail so that you have clear guidelines when determining what fair compensation will look like for the role.  

Step 2: identify similar organizations  

Next, identify around 15-20 organizations that are similar to yours. Start with business that are already known to you, like competitors and other child care businesses in and around your area. Then, utilize your resources to find even more. Use the internet to search for other organizations that are both local and nonlocal that provide similar services to yours. Do the families you serve know of other child care businesses from their own networks?  

Look for businesses that advertise and hire for roles that have similar requirements and job functions to what you’ve defined. When you make this list, it is important to find organizations that are most like yours. If you are operating a large child care center with multiple classrooms, your business, services, and employee roles are likely not comparable to that of a child care home that is based out of the business owner’s house.   

Step 3: collect data  

From the list of organizations that you have identified, search for job listings and hiring ads that are available. Find descriptions and circumstances like the role that you are hiring for. Look at the pay and benefits that these businesses are advertising and pay attention to experience, education, and other requirements that are asked for. All these attributes have an impact on the amount of compensation offered. You can also check salary sites for more insight on the compensation offered. Record the wages and compensation offered for each listing you can find.   

Step 4: analyze Results  

Now, you should have a long list of similar organizations to yours and the wages and compensation they offer employees. List the salaries you’ve collected from lowest to highest. Usually, these will fall within a similar range. Ignore any outliers—any salaries that are much higher or lower than the others.  

Now, look at the numbers you have. Where does the salary that you plan to offer fall with the others? Ideally, to be offering a competitive pay, you will want to fall within the upper 50% of the salaries you’ve arranged. Be sure to consider total compensation as well. How much PTO are these other businesses offering? What does their healthcare and retirement plans look like? Remember that offering fair and competitive compensation attracts and keeps dedicated employees. If you find that your offered compensation falls low on the scale, it is worth considering paying the employee more and offering more benefits.  

Remember, offering benefits in addition to wages will make you a more competitive employer. Investing in the health and wellbeing of your employees through multiple benefits is an investment in the success and quality of your business. It is important to offer common benefits like personal time off (PTO), overtime pay, health care, and retirement. Our guide on how to offer benefits will be useful to you as you learn more about setting up these benefits for your employees.  

To stand out as an employer, also consider additional perks that you can offer to your employees. As a child care business, think about offering a discount for employees’ children. Find and assist with professional development opportunities for your staff, like training classes and certifications. Maybe you can offer a health and wellness stipend to help with gym and fitness membership costs. Think of unique and helpful ways to support your staff!  

When you decide on fair pay and benefits for your employees, it is important to know some common mistakes. This will help your child care business keep growing and doing well. 

1. Ignoring market research: Do not ignore the research you have done! If you find out the average salary and then offer less than that, new employees will likely choose other businesses that pay more.
2. Disregarding legal compliance:  When deciding on wages and pay, know the laws about minimum wage, employee types, and overtime pay that you must follow.
3. Ignoring employee input: Be sure to listen to employee feedback regarding compensation and the workplace culture. Are many employees not happy with their pay? Have they expressed a desire for more PTO? It is important to listen to employees to maintain a happy and productive environment.  
4. Not considering benefits beyond salary:  It is important to think about benefits along with wages. Fair pay includes both money and other rewards. Offering good benefits makes you a better employer that good workers will want to work for. If you do not offer the same benefits as other businesses, people may choose to work for the businesses that offer more.

If you don’t feel confident determining a fair wage or setting up benefits for your employees on your own, it’s always best to reach out to a legal or financial expert who can best advise you. With their help, you can be certain that you are upholding your legal obligations and are offering the best wages and compensation for your unique circumstances.  

Additionally, if you’ve done your market research and feel as though you can’t afford to pay your employees a fair wage and other compensation, it may be time to revisit your budget and child care rates.

Disclaimer 

The information contained here is for educational purposes only and is not intended to constitute legal, tax, or financial advice.