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Setting Your Company's Salary Scale to Your Location's Standards

What are the salary standards in your new location? Your facility's success - from profit margins to worker satisfaction - depends on getting the numbers right.

Debra Williams (Nov 08)
Regardless of the size of your facility, few factors have a greater impact than the pay scale. Set it too low and you'll find yourself with too few employees or only employees who have already been rejected by other organizations in town. Set it too high and the labor costs will eat away any profit margin from your new facility. But with a little research and careful planning, the wage rate at your facility can be right on the money - making everyone from the janitor to the head engineer happy.

Where to Start
There are a number of ways to research the going pay rates for the area in which you plan to locate:

• Begin with state economic development offices and regional development agencies. Up-to-date and accurate state and regional data can be broken down by skill level and then by county, city, and even neighborhoods. Many site selection consultants choose to start with state or multi-regional organizations because they tend to provide a more unbiased, comprehensive view of labor costs.

• The U.S. Department of Labor's Bureau of Labor Statistics maintains data from across the United States. While overall national data may be the first that you encounter, a little digging through the available databases will narrow the information.

• Other employers in the area are excellent sources of information, and you may be surprised to find out how much information each is willing to share. Most companies recognize the benefit of new industries and business in the area - improved infrastructure, shared costs for services like wastewater treatment, and even a more stable local economy, which can reduce turnover.

• Some local chambers of commerce offer data information, or can conduct research on behalf of a cloaked company or consultant.

Dollars and Sense
One headhunter who often staffs executive positions sees advantages to scaling salaries above a region's prevailing pay rates. "Going under the prevailing rates puts your facility's ability to operate in danger because you get the people no one else wants," says Robert Baron, president of American Real Estate Executive Search Company, which operates as a headhunting firm in the United States while concentrating on real estate and site selection in Canada. Offering higher pay may attract higher quality employees to your company. "You have to entice people to move," he says. "

Some business experts believe a new facility in a new location is an opportunity to try new compensation models. "When talking to future employees, companies should be able to offer more than just a wage," says Jim Moniz, president of Northeast Vision Link in Braintree, Mass. "The best employees will be more interested in companies that give them the opportunity to increase personal wealth through company stock plans or profit sharing. Show prospective employees the value of working with the organization. Show them the future."

Moniz says the current hourly wage model would be more effective in both attracting and retaining top-notch employees if pay were more closely tied to company performance. He doesn't advocate such a direct connection to individuals and the company's vision, but rather to departments or job classifications. "By doing that, an employer is not competing in the market for the same pool of employees. Rather, the employer becomes the standard." For this plan to work, employees have to know about it from the beginning of the interview process and have to understand it. "Make that part of the interview process," Moniz says. "Be up front. `We're offering you this position at this rate. Here, you're also going to be able to have opportunities to increase your income and your wealth.' Then, outline your incentive plans."

Of course, the salary is only part of a competitive package. Training programs are a big attraction, particularly for manufacturing employees. Paid time off, medical and life insurance, and a 401(k) match are all considered necessities in today's job market. On-site childcare remains popular with employees but has proven too expensive for most employers. Offered options like medical savings accounts, payroll deductions for Roth IRAs, and financial planning services are becoming more popular. "For the last number of years, profit sharing and stock sharing were guarantees of future income," says Baron. "Now, as companies are facing earning problems, people may change expectations or want something more concrete."

Spreading the Word
Even if a new facility moves into town paying top wages and offering great benefits and terrific quality-of-life changes, getting the word out can be difficult. Hiring managers often find themselves competing with other companies that have become known and trusted as a region's longstanding top employers. "If you're moving into a small town, the simple act of showing up creates a certain amount of buzz and has an impact on the market," says Baron. "If you're relocating to New York City or Chicago or a big market, nobody is going to notice you. In that case, you have to engage a professional to act on your behalf or you'll have to put a significant amount of money into advertising."

A nationally-known company may also have an advantage. For example, Baron believes that some smaller manufacturers located in the Chattanooga, Tennessee, area will likely lose employers to the new Volkswagen plant that will be locating there. "Well-known companies do have an impact, especially with workers looking for stability," he says. "Volkswagen's name will help in recruiting efforts because of the size of the company and the perceived stability."
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