You can be on Entrepreneur’s cover!

5 Factors in Setting the Right Salary Balance is key in deciding the proper compensation for your team.

By Gwen Moran

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Setting the right salaries for your employees can be a tricky matter. Pay too little and it will be tough to attract the right talent. Pay too much and you're not maximizing your workforce dollar. But finding that middle ground can be a challenge, says Ken Abosch, partner, broad-based compensation marketing, strategy & development leader at global human resources consultancy Aon Hewitt. He says there are five key areas to examine before you start setting salary numbers in stone.

Skill Profile. Be specific about the skills that you're going to need in the role you wish to fill. Different skills have different degrees of preparation, such as degrees, certifications, licenses or experience, and "those come with different price tags," says Abosch. But don't always err on the frugal side. Sometimes investing in people who have skills or other attributes that will help stretch your company's abilities and offerings can offer a return on investment like no other. For example, investing in an experienced sales manager or a new employee with a professional certification that will allow you to offer additional services may be exactly what your company needs to grow.

Related: Why Do People Actually Quit Their Jobs? (Infographic)

Importance. Abosch advises thinking objectively about how critical the role is for your organization. As you structure your staff, think about where the most critical roles lie. Who are the people whose departure would be problematic? In addition to looking for ways to mitigate that potential damage, such as cross-training staff and dividing responsibilities so no one person has too much power or control if possible, realize that the more critical the role is to your organization, the more you're likely to have to pay that person, he says.

Supply and demand. The labor pool from which you're drawing will have ebb and flow in its supply. If the economy is good and jobs are plentiful, you may have to pay more to attract talent. When the job market is tight, you may have a greater talent pool from which to draw without paying a premium. Simple indicators can often be telling. Your trade or professional association may be a good source of information. The number of resumes your company receives in response to ads can be telling. Even checking online and newspaper job ads can be useful. Typically, listings are more plentiful when there are more jobs.

Related: Should You Pay Employees an Hourly Wage or a Salary?

Information. You can also get insight into setting salaries from a variety of areas. Consult web sites like and to get a sense of the work environments and pay rates reported. These can vary for a variety of reasons, so use them as only part of an overall picture. Your trade group or professional association may offer insight or even publish salary surveys. The National Association of Colleges and Employers also publishes a salary calculator.

Industry. Some industries are simply known as being higher-paying and that typically affects overall pay scales. If your industry is enjoying flush times, you're probably going to have to pay more if you're competing for talent.

"One of highest paying sectors is energy – oil and gas -- and has been for years. Someone going into that industry is going to experience higher salary or total rewards that are richer than other industries, such as better health insurance, education reimbursement [in addition to premium salaries]," Abosch says.

Related: The 25 Best Companies for Employee Compensation and Benefits

Gwen Moran

Writer and Author, Specializing in Business and Finance

GWEN MORAN is a freelance writer and co-author of The Complete Idiot's Guide to Business Plans (Alpha, 2010).

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Side Hustle

He Took His Side Hustle Full-Time After Being Laid Off From Meta in 2023 — Now He Earns About $200,000 a Year: 'Sweet, Sweet Irony'

When Scott Goodfriend moved from Los Angeles to New York City, he became "obsessed" with the city's culinary offerings — and saw a business opportunity.

Personal Finance

How to Get a Lifetime of Investing Experience in Only One Year

Plus, how day traders can learn a lesson from pilots.


94% of Customers Say a Bad Review Made Them Avoid Buying From a Brand. Try These 4 Techniques to Protect Your Brand Reputation.

Maintaining a good reputation is key for any business today. With so many people's lives and shopping happening online, what is said about a company on the internet can greatly influence its success.


Save on Business Travel with Matt's Flight's Premium, Only $80 for Life

This premium plan features customized flight deal alerts and one-on-one planning with Matt himself.

Science & Technology

Here's One Reason Urban Transportation Won't Look the Same in a Decade

Micro-EVs may very well be the future of city driving. Here's why, and how investors can get ahead of it.


I Got Over 225,000 Views in Just 3 Months With Short-Form Video — Here's Why It's the New Era of Marketing

Thanks to our new short-form video content strategy, we've amassed over 225,000 video views in just three months. Learn how to increase brand awareness through short-form video content.