Pay Day

How to determine employee salaries.
Magazine Contributor
7 min read

This story appears in the November 1997 issue of Entrepreneur. Subscribe »

Q: I'm looking for information to guide me in setting salaries within my company, especially for my controller (who is a CPA) and for other top-level managers. Is there a formula I should use to determine salary amounts? Also, should raises and year-end bonuses be calculated as a percentage of annual salaries? My company has grown to $5 million plus in the last six years. I employ 25 to 30 people. I have no formal education in business. Any advice would be appreciated.

Tod Swank

Via the Internet

A: Max Messmer is chairman and CEO of Robert Half International Inc., a staffing firm specializing in the placement of accounting, finance and information technology professionals, and parent company of Accountemps, RHI Consulting and RHI Management Resources. Messmer is also the author of several staffing and career-guidance books:

While there is no formula that will provide you with the ideal salary for each position at your company, there are certainly appropriate ranges. Some of the key sources for determining suitable salary ranges for your employees are: 1) classified ad listings for specific positions, both in your daily newspaper and on the Internet; 2) professional and trade organizations for the specific fields in which you are hiring (most organizations regularly publish salary data); 3) human resources consultants; and 4) specialized recruiters in the appropriate fields.

To address your question on the salary for your controller, our 1997 Robert Half and Accountemps Salary Guide, which is based primarily on actual job orders filled in our U.S. offices, states that a controller with a CPA designation at a firm of your size generally receives an average annual starting salary of $51,700 to $67,925. This is a nationwide average. When setting your own ranges, keep in mind such factors as the cost of living in your area and the availability of qualified candidates. Accountants with a CPA designation can often command as much as 10 percent to 15 percent more than their nonCPA counterparts. Our Salary Guide lists ranges for positions in accounting, finance, banking and information technology. You can order a complimentary copy of the guide on our Web site at or by calling (800) 803-8367.

Generally speaking, raises and bonuses are determined as a percentage of annual salary. Traditionally, the standard calculation for raises has been based on company performance combined with Consumer Price Index increases, which nationally have averaged about 3 percent in the past five years. However, in the current record-low unemployment environment, you may well have to offer more generous raises to remain competitive.

When deciding on the appropriate mix of salary increases and bonuses, much depends on your corporate philosophy and goals. A growing number of employers are increasing the portion of compensation that is performance-based, such as bonuses. Through this approach, companies can more directly and immediately reward outstanding achievement. Many firms are basing bonuses on the performance of both the company and the employee to encourage both personal and team accomplishments. And while we're on the topic of incentives, companies of all sizes (including privately held ones) are increasingly offering stock options to their employees.

Your company may be reaching the point where you require an experienced human resources manager to establish compensation and benefits policies, as well as oversee other personnel issues. For example, in addition to considering stock options, you may want to set up a 401(k) or pension plan for your employees, or a profit-sharing plan.

While no one can discount the importance of financial rewards, keep in mind that today's job candidates are more concerned with the corporate environment and quality-of-life issues than ever before. In a recent executive survey conducted by Robert Half International, corporate culture rivaled employee benefits in importance for candidates during job interviews. Many of our small-business clients use this trend as a competitive advantage, offering such perks as flexible work schedules, casual dress days, additional vacation time or telecommuting opportunities. The costs of this approach are minimal, particularly when compared to the value-added benefits of improved recruitment, productivity and retention.

Regardless of the monetary and nonmonetary ways you compensate your employees, creating an employee-friendly environment and determining competitive compensation ranges take time. Both will require being flexible and adaptable to changing workplace trends and local conditions. The investment is worth it--the difference between a good company and a great company is its people.

Q: My canned, homemade pickled asparagus recently won "Best of Show" at the San Bernardino County Fair in California. I'd like to sell it at the spring Asparagus Festival in Stockton and to local farmer's markets. But a simple request for a permit has turned into an endless (and expensive) trail of forms, requests and referrals. I want to market my asparagus on a very small scale. Help!

Mary Miller

Apple Valley, CA

A: Marsha A. Echols is the Washington, DC, counsel to the National Association for the Specialty Food Trade Inc. (NASFT):

Though taking your creation from kitchen to market can be a rewarding venture, your success will depend on more than your recipe. You must pay attention to seemingly extraneous matters just to sell a few jars of your prized pickled asparagus.

First, what's your goal? Are you sure you'll always be satisfied with farmer's market sales? If the people at festivals and local markets are excited about your product, will you want to start selling statewide? Outside the state? Actually, it won't take much more effort to meet requirements for markets beyond your state, which involves following federal trademark and labeling requirements and creating a business structure that protects your personal assets. You must know how to ensure your product is safe to eat, let consumers know exactly what they're getting and protect yourself if a consumer claims your food caused an illness. Try taking the necessary steps in stages:

  • Trademarking. Some experienced food entrepreneurs think the first step should be to spend the few hundred dollars required to register your trademark, either with the U.S. Patent and Trademark Office in Washington, DC, or at the state level for statewide trademark protection. Why? If you sell your pickled asparagus under the name "Best of Show" at farmer's markets for three years and later decide to sell in a wider or interstate market, someone else might already have the right to that name.
  • Health and safety. Many city, county and state governments require a license, permit or certificate to ensure "good manufacturing practices" where kitchen equipment and configuration standards are followed. Most jurisdictions prohibit the use of a home kitchen for preparing foods for public sale or consumption. That's why many food producers use a "co-packer" to produce and pack for them, or they locate an approved co-op kitchen facility, perhaps at a local university.

Taking these steps is important for protecting yourself against liability claims and to obtain product liability insurance. Though not always required by local, state or federal governments, liability insurance is often carried by reputable food producers.

  • Food labeling. The label informs the consumer about the manufacturer, the product, possible allergens and, if you choose, the product's nutritional value. However simple the label, it must include your name and address, product trade name and common name, ingredients, and net weight. You can add nutrition labeling later.
  • Resources. Organizations such as the California Specialty Foods Association (800-774-2732) and the Food and Libations Association of Virginia (757-565-4144) publish valuable information and have members who can answer your questions. Local agricultural and business schools may have business development centers that can assist you. Also, there are such product-specific trade associations as Pickle Packers International (630-584-8950) that may be aware of issues concerning common names, ingredient listings, health and safety. Your state's department of agriculture can explain any special rules, especially any reduced requirements for selling at farmer's markets.

If you decide to sell your product nationally, the NASFT (212-482-6440) offers information on food labeling, its Showcase magazine containing a "Food Laws" column, as well as marketing opportunities through its Fancy Food Shows. A search for nongovernment organizations may turn up additional resources.

Contact Sources

Marsha A. Echols, 1529 Wisconsin Ave. N.W., Washington, DC 20007-2739, (202) 625-1451.


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