How to determine the salary of your first employee

You are going to hire staff for the first time. How do you determine what salary to offer? A good salary makes you an attractive employer. But you also want to avoid paying excessive personnel costs. You can hire a financial advisor, or you can set the salary yourself. This article will guide you through the steps to take to determine a fair and appropriate salary. 

The level of a salary depends on the position, education level, age, experience, industry, collective labour agreement, job market, and region.

A guide to determining a salary

Step 1. Know what the minimum wage is 

If you hire someone 21 years of age or older, you must pay at least the legal minimum wage. If your future employee is between 15 and 20 years old, then you pay the minimum youth wage.

Step 2. Check whether you are covered by a collective agreement

Your company may fall under a collective labour agreement (a CAO). Many collective bargaining agreements contain agreements about the minimum salary you must offer. 

Step 3. Compare salaries in your sector 

Compare salaries for similar positions in your region and sector. For example, consult comparison websites, online salary checkers, or talk to your accountant. Look at job postings from other employers in your area. Your industry association can also give you advice on salaries in your sector. Now you can estimate approximately what you want to offer in terms of salary. Also look at age and experience. For an older employee with more experience, the salary you offer will be at the upper end of your range.

More than salary

Your personnel costs are more than the gross salary. You also pay employers’ costs. These will be about an extra 30%. The gross salary and employers’ costs combined are your payroll costs. Payroll costs are all the costs you as an employer pay for employees in exchange for the work they do. These are not just salaries, but also holiday allowance, fixed bonuses, fringe benefits, employee insurance, health insurance contributions, and payroll taxes. You can use an online tool (in Dutch) to calculate payroll expenses. Check if you are eligible for subsidies and allowances that will reduce your labour costs.

Employment benefits

Holiday allowance is compulsory for everyone. Your employee is entitled to at least 8% holiday allowance per year. If your business comes under a collective labour agreement, then the minimum terms and conditions of employment are already set out. Such as the amount of a bonus or travel allowance. The collective labour agreement may also contain agreements on the payment and amount of holiday allowance. 

In addition, look at what you want to offer your future employee. Such as a pension plan, or a profit-sharing scheme. Maybe you can give a discount on your company’s products or services. Good employment conditions ensure that you are an attractive employer. 

Negotiating salary

From the beginning of your application process, be clear about what salary you can offer. That way you avoid misunderstandings when you are in the final stages of the process. If you cannot agree on the salary, discuss what else the applicant considers important. For example, training courses, opportunities for advancement, or the option to work partly from home.

Also agree on future salary increases. This way you offer your employee perspective. Will there be an annual percentage increase or will your employee receive a raise if they perform well? Will you take inflation into account? If you are covered by a collective labour agreement, this has often already been set out. Adjustment for inflation is not mandatory if it is not in your collective labour agreement.