How to Set Employee Wages Accurately as a First-Time Franchisee

For first-time franchisees, there’s a lot to learn. Thankfully, the franchising model provides plenty of support, and Point Franchise is here to offer even more. Here’s how to go about setting employee wages accurately as a franchisee.

When you’re setting up a franchise, hiring staff is one of the most important steps. Employees and team members make a massive contribution to the overall success of a business, and compensating them correctly is crucial. In this article, you’ll discover all you need to know in order to pay your employees the right amount.

The importance of setting the right employee salary as a first-time franchisee

In the UK in April 2018, 439,000 people were paid less than the hourly minimum wage, which all UK employees must legally receive [Low Pay Commission]. This number is unacceptable, and the importance of paying employees correctly - particularly where statutory requirements are concerned - cannot be overstated. 

Paying the right wage will ensure that you hire the right person and make them feel respected, so that they, in return, respect you. Here are the key legal considerations to take into account when setting the right salary for your employees:

The National Minimum Wage 

This is the minimum amount of pay that almost all workers are legally entitled to per hour. The amount will differ depending on the age of your workers. For example, the following groups are entitled to the following rates:

• Apprentices - £4.30 per hour

• 16-17 year olds - £4.62 per hour

• 18-20 year olds - £6.56 per hour

• 21-22 year olds - £8.36 per hour

The National Living Wage 

The living wage is paid at a higher rate than the national minimum wage (£8.91), and workers will be legally entitled to this wage once they’re 23 years old. Its aim is to offer a wage that allows workers to live comfortably and realistically on their income. Full-time workers over 22 are of course entitled to receive the National Living Wage, but so are:

• Part-time workers

• Casual labourers

• Agency workers 

• Apprentices, trainees and workers on probation

• Disabled workers 

• Agricultural workers

• Foreign workers 

• Seafarers

• Offshore workers 

The process of setting employee wages

Depending on the type of franchise you’re working with, the way in which employee wages are set will change. If you’re running a business that relies on workers, like a fast food franchise or a cleaning franchise, things are much simpler to figure out, as standard wages for set roles are likely built into the franchisor’s operational model.

But if you need to hire an admin assistant or a marketing manager for your franchise, things can get a bit more complicated, with fewer franchisor guidelines available to help you come to a decision. If you’re not sure where to start, consider asking other franchisees in your network who might have similar employees on their payroll.

Another question that will differ from franchise to franchise is who is actually responsible for setting wages? Is it you, or your franchisor? The answer to this question will be stated in your franchisee agreement, but in simple terms, it tends to come down to this - if you’re acting as an employer (hiring employees, setting their terms and conditions within a contract, so on), you’re responsible for setting their wages and paying them via payroll.

Six top first-time franchisee tips for setting employee wages accurately

If you’ve confirmed who’s responsible for handling your payroll, and it’s you, it’s time to go about deciding the correct amount to pay your employees. Here are six top tips to help you ensure, beyond the legal parameters already discussed, that you’re paying your employees an accurate and solid wage...

1. Consult with your franchisor and seek their advice 

Most franchisors will offer franchisees a high quality of ongoing support and training when they make an investment. Don’t be afraid to utilise the expertise of your franchisor in order to gain knowledge and insight from their experience, especially in a tricky and sensitive area like employee income. 

2. Understand your budget before you start recruiting

Nailing the recruitment and selection process is a first-time franchisee hiring must. Make sure that before you start to recruit, you have a clear understanding of your budget, as this will determine many of your hiring decisions.

3. Write an accurate job description, including salary

Be clear, concise and comprehensive in your job description, making future employees aware of salary, benefits, expectations and requirements. Let candidates know exactly what they’re applying for to increase the likelihood of finding someone who’s right for the job. 

4. Do your research and gather up-to-date salary data 

Make sure you’re competing, in terms of salary offerings, with businesses in the same and similar sectors. Doing your research and discovering what other companies are offering workers will help. 

5. Talk to potential employees and discuss their pay expectations 

If you choose not to list salary in your job advert, you might want to get an indication from potential employees during the interview process as to what they would expect to be paid for the role. You could also ask what they were paid in their last position to gain deeper insights.

6. Make an offer 

If you’ve found a candidate that feels like the right fit, make them an offer with room for negotiation. Always be mindful of the budget that you’ve set, and try not to exceed it. 

It goes without saying that you have to offer fair pay. Not only to attract more candidates to your company, but also to improve your chances of retaining them. After all, if you don’t benchmark your salaries against the industry average, you risk losing key employees to local or industry competitors.
—CV Library 

Employee recruitment processes deserve thought and investment 

The employee recruitment process deserves time, consideration and research. Hiring quality franchise staff and paying them fairly is the best way to ensure that your operation is working towards profitability, growth and success. In a survey of 540 full-time workers across a range of ages and companies, 55% agreed that the most important workplace value was a company-wide commitment to fair pay [Clutch]. If you underpay your workers and make them feel generally underappreciated, you risk them:

• Making less effort during working hours 

• Not respecting the agreements made within their employment contract by arriving late, leaving early, or calling in sick regularly

• Tarnishing the reputation of your franchise unit, and by extension, your entire franchise

A fairly paid staff is a happy staff, and happy workers are 13% more productive.
—Oxford University

Running a franchise successfully comes with huge rewards

Though running a franchise comes with huge responsibilities, it also comes with huge rewards. Setting employee wages accurately is a really important step, and will allow you to hire the right people and grow a reliable, hard-working team. If you’re not yet a franchisee, but you’re interested in taking the plunge, browse available franchising opportunities via Point Franchise’s UK franchise directory.