How to determine your employees’ salaries

December 19, 2012 by Ola Emmanuel (oakmedia@yahoo.com)

Ola Emmanuel
| credits: File copy

Towards the end of October 2012, the news broke that Sweden is having a serious problem. The Scandinavian country of 9.5 million people can no longer generate sufficient wastes they need to turn to raw materials to produce energy. Yes, the country ran out of garbage and was forced to start importing rubbish (call it wastes, refuse, filth, trash or whatever) from another country’s waste dump site. With great entrepreneurial spirit, Sweden was able to see opportunity even in wastes that may pose health hazards if not properly managed.

Through the waste-to-wealth initiative, Sweden, is powering a quarter of a million homes by the incineration of waste. I remember Nigeria, a land where we generate so much ‘wastes’ that ‘dump sites’ are bursting as a result of pressures from all manners of garbage. The streets are still filled with rubbish. Shouldn’t we see opportunities here to enter a trade agreement with Sweden so that we can start exporting wastes to them? But, wait, can’t we turn our own wastes to good use by copying how the people of Sweden do it? There is no problem in copying if you do it right. In business, this is knowledge transfer. We need to not only learn how to get the best out of every circumstance that confronts us, but take further steps and actions to show that Nigerians are true M.Sc (Masters over Situations and Circumstances) graduates. The Swede have proven to be a people who have made getting the best out of wastes a way of life. Why can’t we?

And talking about getting maximum productivity from resources, let’s look at an aspect of business where many business owners do not seem to know how much they really pay in their attempts to make good things happen in their businesses. Employers of labour may know how much is paid their employees every month but not all know what they really pay for the labour the staff members give within the period. For instance, if an employee receives N60,000 as monthly salary, it is not correct to see the amount as payment for 30 days’ work. Where this is the case, a business owner has failed to truly know the real amount of money paid to an employee to spend a minute of his time for the business. Where the real amount paid is not known, the true value an employee gives to a business to earn his pay becomes unknown, lost and such services by an employee is rendered anyhow – if at all he tries to render any service. The end-result is waste of money by business owners and collapse of businesses. We have been seeing situations where business owners pay salaries every month but no real value is given by some employees in return.

A business owner should know how much he pays per hour to an employee for the performance of a job. When doing your business plan, it is important that you take a critical look at how much you really pay your staff members to do their jobs.

In our last two features on staffing, we established that before you hire any employee, you should first identify the tasks he is to perform in your business. Also, the business owner should identify what combination of skills and experience that would be required by the employee to perform the tasks effectively. It is after this that the business operator can fix a competitive amount as monthly pay. To really know how much you are paying an employee, you should determine how many hours of work he gives to your business per day and how many days he is at work in a month.

No business pays for the hours an employee is not at work. This is a reality many Nigerian business owners and employees are yet to really understand. When employees are on their way to their offices or when they are on break during the day, they are not at work for the business. In the developed economies, no one argues with this fact. The amount paid for each hour work is known to both the employers and the employees. By this, high productivity is sustained: no loafing around, no engagement in unproductive activities, absenteeism from work is reduced to barest level, the real value to be given and the importance of working in a business is known to both the employers and the employees. The end-result is higher productivity and a prosperous economy.

When you pay a staff N60,000 salary every month, it is not correct to say you pay N2,000 daily. What you really pay per day will be determined by how many hours the staff spent in a day at work. If the employee starts work by 9am and closes by 5pm (with a one hour lunch break), such employee works for seven hours in a day. If he works five days a week, it means he worked for 154 hours in 22 days of a month and earned N2,727 as daily pay or N389.61 per hour.

If you are able to determine how much you pay each of your staff members per hour, you will be in a better position to demand performance from the worker. This action will move the business to a greater height. But how do you go about sorting this out? Your business plan preparation takes care of this; and you should communicate it to your employees loud and clear. It is what is obtainable in a thriving economy – that is why they minimise waste, turn it to wealth and continue to thrive.