As an employer, landing on a salary for new employees is not an easy decision to make. You want to attract incredible people, treat them well, and make sure they stay with you. But you also have a bottom line to think about. Overpaying means having less money for other business expenses, while underpaying puts you at risk of losing people because you’re not showing how much you value them.
To settle on a starting salary that’s fair for everyone, you first need to get the lay of the land so you can guide yourself toward a number you can feel good about showing your new employee.
Define the role
Before you start circling a salary range for a new role, you need to get crystal clear on what the job actually entails.
Choose a job title that’s clear, legible within the industry, and that can be compared to similar roles in other companies. If there are other job titles like it out in the world, you can use the market rate for that role as a starting point.
Write a solid job description that accurately details the main tasks to be performed day-to-day.
Contextualize the role within your company: How senior will this person be? Accurately placing this role within the company can help you choose a fair new hire salary. Looking at what current employees in comparable roles earn can help you establish internal equity. If a new hire would out-earn a more experienced teammate, you risk resentment, turnover, and pay gaps that are hard to explain later.
Research, research, research
To land on a salary range that’s competitive yet fair, you’ll have to do some market research. This means looking outside your company to find out what other employers pay for similar roles.
Start with a few sources. No single source will give you the whole story. Consider these sources to get a full picture of the competitive landscape:
Salary surveys and benchmarking tools. Reports from compensation firms and benchmarking tools (like Payscale or Salary.com, or Gusto’s New Hire Pay Index), plus self-reported sites like Glassdoor, show salary data for similar companies.
Job postings. Roles at comparable employers often list pay ranges, especially in states with pay transparency laws.
Government data. The Bureau of Labor Statistics publishes wage data by occupation and region.
Your network. Other business owners and recruiters can tell you what’s happening in your market right now.
Adjust for your situation. Market rates vary by:
Geographic location. The same role can pay very differently in San Francisco and Omaha, where the cost of living and market demand are vastly different. Remote roles raise the question of whether to pay by employee location or company location.
Industry. A bookkeeper at a tech company may earn more than one at a nonprofit.
Company size. Small businesses often have budget constraints that prevent them from matching large-company base pay, but they can compete on flexibility, growth and professional development opportunities, and benefits packages.
Look at a range, not a point. Pay data is a spread. Note the low end, the midpoint, and the high end, and use them to build your own salary range.
Choose a salary model
Salaries can be based on either the job at hand or the person you’re hiring. Generally, there are two pay philosophies to choose from:
Job-based pay is defined by the job’s duties, and then adjusted to fit other factors like education and certifications or a person’s seniority.
Person-based pay (also referred to as skill-based pay) focuses more on the skills, competencies, and achievements of an individual. For instance, you may start someone with a base salary, and then reward them as they gain targeted skills or core competencies needed to thrive in their roles.
Job-based pay is the most typical approach companies take, but as you continue to research, you may find that person-based models are becoming more common in your industry or niche.
Check pay transparency and legal requirements
Before you post a job or make an offer, make sure your pay practices are legally compliant. Look into the following in your state/city:
Pay range disclosure. A growing number of states, including California, Colorado, Illinois, New York, and Washington, require employers to include a pay range in job postings. Some laws cover employers with as few as one employee, while others apply only to larger companies. Remote roles are also sometimes included, so a job you could fill from a covered state may be subject to that state’s rules even if your business is based elsewhere.
Salary history bans. There’s no federal ban, but roughly 20 states now bar employers from asking candidates what they earned in past jobs (asking about salary expectations is generally still allowed). Some states also restrict using a figure a candidate volunteers, so it’s safest to base your offer on the role’s range and the candidate’s qualifications.
Pay equity. Federal and state laws prohibit pay discrimination for substantially similar work. Document why each hire lands where they do in the range, such as experience, skills, or certifications.
Take the total compensation package into account
Base pay matters, but it’s only one aspect of what candidates weigh. In WorldatWork’s 2026 State of Rewards report, competitive base pay was rated important by 87.6% of respondents for deciding to join a company and 92.8% for deciding to stay long term.
Pay isn’t the only thing that keeps people around, though. When employees were asked what drives their decision to stay, 70% named pay and 60% named flexibility.
When you build an offer, think beyond base salary by considering total compensation factors like:
Health insurance (e.g., medical, dental)
Paid time off (PTO)
Performance bonuses
Paid sick days
401(k), retirement plan, and/or pension
Flexible schedules
Be confident in the number you pick
Some candidates will accept the salary you propose outright. Others will come back to you with a higher number. Salary negotiations are normal, so if the number is within your range and fits your internal equity, it’s usually best to accept it so you don’t lose out on a great candidate (that’s also why you did so much research in the first place).
Now that you know how to find your way out of the salary maze, picking one won’t feel like you’re randomly choosing it out of thin air. A thoughtful, research-based approach will help you land on a number that’s fair, competitive, and will make your employees feel valued.
FAQs
Should you offer a new hire the midpoint of the salary range?
Not automatically. Starting pay should reflect documented, job-related factors like experience and skills, not a default target. Some employers start new hires below midpoint to leave room for growth, but midpoint is typically meant to represent a fully proficient employee, so a candidate who already meets every requirement may warrant an offer at or near it.
Can you pay a new hire more than current employees in the same role?
Yes, it's legal, but it can cause problems if you can't explain the difference. Document job-related reasons such as experience, skills, or market conditions. If a gap can't be justified, or it lines up with a protected characteristic, it can raise pay equity concerns. If market rates have moved, consider adjusting existing employees' pay too.
What’s the difference between a salary range and a hiring range?
A salary range covers the full pay potential for a role, often a 30% to 50% spread. A hiring range is a narrower window within it, often 10% to 20%, used for new hires. Starting someone in the hiring range leaves room for raises as they gain skills and experience.
How do you negotiate salary with a new hire?
Treat negotiation as a normal part of the hiring process and decide your maximum before you talk. If a candidate asks for more than your base pay budget allows, other levers can help close the gap, such as a signing bonus, extra PTO, an earlier salary review, or a title change. Keep any offer consistent with your internal pay equity.
Quick note: This is not to be taken as tax, legal, benefits, financial, or HR advice. Since rules and regulations change over time and can vary by location, consult a lawyer or HR expert for specific guidance.
