How much to pay employees: a small-business guide

How much to pay an employee depends on four inputs: market data for the role, your location, the seniority you actually need, and your company stage. Benchmark the market median first, then position each role deliberately above or below it.

This guide walks through those four inputs, shows where free salary data misleads, and then does the useful part: a step-by-step walkthrough of the free US government wage data anyone can use, with a worked example.

The four inputs that set a salary

Market data is the anchor: what employers actually pay for this occupation, ideally as percentiles (P25, P50, P75) rather than a single average that one outlier can drag around. Geography adjusts it: the same title can pay 25 to 40 percent more in a tier-1 metro than in a smaller market, and remote policies force you to pick a reference market on purpose. Seniority is the biggest multiplier people get wrong; a senior engineer is not a mid-level engineer plus 10 percent, the gap is commonly 30 to 50 percent. Stage sets what you can afford and what you offer instead: early startups often pay below market base with equity, while an established company competes on cash and stability.

Where free salary data falls short

Job-board ranges are what employers hope to pay, published to attract clicks, and since posting laws arrived many are defensively wide. Self-reported sites skew toward tech, toward seniority, and toward people motivated to share, and they reflect current pay of incumbents rather than what a new hire accepts. Both are fine for a sanity check and bad as your only source. The most underused free source is the government one below.

How to use BLS OES data yourself, step by step

The US Bureau of Labor Statistics publishes Occupational Employment and Wage Statistics (OES): employer-reported wages for about 800 occupations, nationally and by metro area, with percentiles. It is free and it is the base layer under the Wagelist pay band calculator. Done deliberately, the six steps below are the whole discipline of market pricing a job. To use it directly:

1. Go to bls.gov/oes and open the occupation profiles. Find the occupation (SOC code) that best matches the job you are hiring, going by duties, not title. A "customer success manager" is usually closest to a sales or support occupation, not "manager."
2. Open the national profile and note the percentile wages: P10, P25, P50 (median), P75 and P90 for annual base pay.
3. Switch to the table for your metro area, or your state for smaller markets, and note how it runs against national. That ratio is your geography adjustment, and if you hire remotely it is worth reading how geographic pay differentials are usually applied.
4. Adjust for seniority. OES pools every experience level in one number, so treat roughly P25 as junior, the median as solid mid-level, and P75 and up as senior for that occupation.
5. Check the data date. OES releases annually with a lag, so add a few percent per year since the reference date to reflect wage growth.
6. Sanity-check the result against two or three live postings for similar roles in your market. You are looking for "same neighborhood," not equality.

A worked example

Say you run a 40-person company in Denver and need a staff accountant with about four years of experience. The OES occupation is Accountants and Auditors (SOC 13-2011). Suppose the current national table shows roughly $66,000 at P25, $82,000 at the median and $105,000 at P75, and the Denver metro table runs about 5 percent above national. These are illustrative figures; pull the current release when you do this. Four years of experience puts the role around the median or slightly above, so your target is about $82,000 times 1.05, call it $86,000. A sensible offer range is $82,000 to $90,000, and a posted range of $80,000 to $93,000 covers the band you would honestly pay. Total time spent: about twenty minutes.

Benchmark the median, adjust for place and level, then choose your position on purpose. The number should never be a guess with a dollar sign.

When to pay above or below P50

Pay above the median when the role directly drives revenue, when the skill is scarce in your market, when a vacancy is expensive by the week, or when your benefits are lean and cash has to carry the offer. Paying P60 to P75 for the two or three roles your business depends on is usually cheaper than the turnover it prevents. Pay below the median only when you offset it honestly: real equity, unusual flexibility, a strong training path for a junior hire. Never set pay below what you could defend out loud to the person earning it; that discount always comes due. Whatever you choose per role, write it into salary bands so the logic survives your next ten hires.

Posted ranges and the last mile

If you hire in a pay transparency state, the number you settle on becomes a public range, so derive the posted range from the band rather than inventing it per ad. The rules on salary ranges in job postings spell out what counts as a good-faith span. This is the core loop of salary benchmarking software, and the reason we built Wagelist for small-business salary benchmarking rather than enterprise comp teams. The method above works with a spreadsheet; the tool just makes it fast enough that you will actually repeat it every time you hire.