How much should we pay our employees?

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Do you spell it paycheck or paycheque? Either way, your employees will want one! Which then leads to "how much should we pay our employees?". As in other countries, in Canada there are several different considerations - some to meet compliance standards like minimum wage and vacation entitlements and others to meet cultural expectations including your company's compensation philosophy and industry or profession market rates.

The first thing is to ensure you are meeting "minimum wage". This amount varies by province or at the national level if you are federally regulated. There are also different wages for some professions. For example, in British Columbia there is an alcohol server minimum wage which is lower than the normal minimum wage as there is an expectation they will receive tips to supplement their income. You may also hear of "poverty wage" or after-tax Low Income Cut Off (LICO), which is above minimum wage and considered the bare minimum to earn if working full time to be able to support yourself with basic food, clothes and shelter. This amount also varies by province, especially as it includes housing costs which can vary significantly from one region to another.

The next step up is a "livable wage" and covers additional costs like education, emergency savings, transit and extracurriculars for children. This too varies by city and when calculating it you'll take into consideration benefits you may offer your employees such as paid sick days, extended health plans, tuition reimbursement programs and transit subsidies. You may need to pay this rate if you are a supplier to companies that have committed to a livable wage at their company and throughout their supply chain.

The other term you will hear is "market rate" which is a comparison to other companies and what they pay for the same or similar role. Depending on the role and industry there are both publicly available information sources for this and salary surveys and reports which have a cost (with many offering a discount if you provide your salary information to add to the data they have). In British Columbia the Association of Professional Engineers and Geoscientists (APEGBC) releases a free salary survey bi-annually, for IT and tech roles a wealth of salary data is available for a fee though HR Tech Group and you can also find many different professions (from manufacturing and trades to professional roles like accounting and marketing) with WCBC's annual paid survey.

For many companies, labour costs are one of the biggest line items in your P&L. Keeping costs low may seem like a good idea but "you get what you pay for" and may need to pay much more than even livable wage to get the quality and quantity of talent you need for your company to be successful. This is where your compensation philosophy comes in and is often called "total rewards" as includes more than just salary or wage. There are a number of variables to consider:

  • Will you pay below, at or above "market rate"? You may hear this called a compa-ratio.
  • Will you vary compensation based on performance, potential, contribution, seniority and level?
  • Will you offer regular reviews of salary to adjust for cost of living / inflation, company performance and individual or team merit?
  • How will you ensure there is internal equity with similar value roles being compensated similarly? Checking for bias and discrimination should also occur as part of this step.
  • What components of compensation will you include? Total rewards may include salary, bonuses, commission, vacation (over minimums), personal days / sick time, extended health plans and insurances, tuition and education programs, and other perks like healthy snacks, bike parking or social events.

A lot to consider but compensation is a key component of human resources strategy. It helps to attract, retain, motivate and align your employees which directly relates to your company's success. Unsure of what to compensate your team or need assistance setting up your compensation philosophy and policies? Contact BrightGo Solutions to review your current state and work with you to setup a total rewards program to help amplify your success.