Working out what to pay an employee involves lots of different factors. You’ll need to consider things like legal requirements, market standards, job responsibilities, and the individual’s skills and experience. So where do you start? In this article we’ll explain how to set salaries for your employees.
Why is it important to get employee pay right?
Getting employee pay right is an important part of being a good employer, employee satisfaction, recruitment and retentin, and morale. Everyone wants to be paid properly and on time, not least because it gives a feeling of fairness and recognition.
It also helps attract and retain top talent, as competitive salaries play a vital part in an employees’ decision to join or stay with a company.
Even if you’re only taking someone on temporarily, such as a temp to help out during busy season, paying them properly (and legally) is still an important reputational consideration.
How do I work out what to pay someone?
The salary you offer should reflect the job role and the skills and experience required. Do your research to understand the industry standards for a particular position, particularly if you’re a first-time employer.
Many resources, such as salary surveys, industry reports, and job boards, can give insights into the average salaries for different roles in various sectors. We’ve gone through a few key considerations below.
What does the job involve?
Consider the specific responsibilities and qualifications for the position. More demanding jobs with a lot of responsibility and specialised skills tend to command a higher salary. Similarly, an employee with a large amount of experience and a proven track record in the industry may need compensating more.
Where is the role located?
Geographical location is another important thing to consider. The cost of living can vary widely across the UK, with London generally being higher compared to other regions. Many jobs are also now hybrid, with some days working in the office and some working at home. This can be very attractive to potential employees looking for a better work/life balance.
What can your business afford to pay?
You need to offer an attractive pay and benefits package, but the fact is you’re still limited by what your business can actually afford. Larger companies may have more resources to offer competitive salaries, while smaller businesses might need to be more strategic.
Employers are required to enrol eligible employees into a workplace pension, and there are also lots of other employer costs you’ll need to bear, such as employer’s National Insurance Contributions.
Don’t forget the National Minimum Wage
The UK government sets a minimum wage that employers must pay. Minimum rates of pay are reviewed annually so it’s crucial to stay updated so you can remain on the right side of the law.
You should be aware of the differences between the National Living Wage and the National Minimum Wage too.
| Employee Age | 2026/27 |
| First year apprentices and Under 18s | £8.00 per hour |
| 18 to 20 years old | £10.85 per hour |
| 21 years and older National Living Wage | £12.71 per hour |
What’s the best way to negotiate an employee’s pay?
Employers and employees may have different points of view when it comes to pay, which makes open communication really important. It’s essential to have a clear understanding of the candidate or employee’s salary expectations, and be prepared to discuss each part of the compensation package you’re offering – especially if an existing employee is requesting a pay rise. Try to be flexible where possible.
Ongoing pay reviews are essential if you hope to retain your best talent. After all, the job market, economic conditions, and the financial health of the business, can change over time, so you might need to make adjustments.
Can I pay employees differently for the same job?
In the UK, paying employees differently for the same job based on things like gender, race, or disability is illegal. Employees must receive the same pay and benefits for doing the same or similar jobs, regardless of characteristics protected by the law. You also don’t want to damage staff morale, or your business’s reputation.
If there are any disparities in pay, they need to be justified by factors such as experience, skills, or performance. Unjustified pay differences may have legal consequences, so be careful and take professional advice if you’re not sure.
What other benefits could I offer staff?
There are many incentives or staff perks you could offer in addition to an employee’s pay, such as a company car, or car allowance. Other examples can be as varied as discretionary sick pay, health insurance, gym membership, or provided meals.
They can go a long way in attracting the best talent. Yes, there are certain things you must offer to meet your legal obligations as an employer, but if you want the very best team, it’s not just about providing the basics. You may need to get creative!
Just be aware some of these are considered to be Benefits in Kind so there are tax considerations.
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