Determining employee pay

Ultimately, wages are determined by competition for qualified workers within a specialty and/or a geographic area. But a number of factors influence how an employer sets pay.

A primary issue to consider is the financial ability of the employer to meet a weekly payroll. Your organization first must have the financial reserves or cash flow to sustain a weekly payroll in order to hire and retain employees.

The next issues to consider are the fair or reasonable pay for the job, combined with how your small business will compete with other businesses to hire workers. It's important to gain an understanding of pay scales in your industry and/or market area.

Of course, federal and state laws often define a minimum pay rate; all employees must receive at least the applicable minimum wage.