One of the primary reasons we seek a job is to earn a salary. Settling our bills, living comfortably, and managing our finances are often the motivating factors in pursuing paid work. However, the question remains: How do we determine what we are worth regarding salary?
It is often overwhelming when gauging fair compensation for a role. Still, when done correctly, it helps us understand income, manage a budget, plan effectively, and identify areas for financial growth.
Come along as we show you the best way to calculate your salary so you can confidently take control of your finances.
Gross salary vs. Net salary
Before calculating your salary, it is crucial to understand the terms associated with it.
Gross salary is your total earnings before deductions, while net salary is your take-home pay after deductions. These deductions can be taxes, retirement contributions, etc.
Here is how to calculate it:
Gross salary: add your base pay with other income like bonuses, overtime, or commissions.
Net salary: subtract taxes, insurance, retirement, and other contributions from your gross pay.
What is salary and salary range?
Salary is a fixed, regular sum an employee receives monthly or annually.
Salary range is the minimum or maximum salary an organisation or industry offers for a particular role. It is dependent on experience and skill set. For instance, a job advertisement with a salary range of $50,000 to $70,000 means an employee could earn any amount within that range based on their skills and qualifications.
Wages and salary explained.
Wages are paid based on hourly rates and can differ depending on hours worked, overtime, or shifts. While salary is a fixed sum and doesn't change based on hours worked, it is often associated with full-time roles.
The best way to calculate your salary
1: Define your role and function
Before calculating your salary, consider your role and its function. Professionals in various roles, even in the same industry, can have different pay cheques based on their responsibilities, tasks, and skill requirements. To do this, list your core functions and specialities. This list will create a practical foundation for calculating your salary based on work contributions and responsibilities.
2: Factor in your experience
Experience is one of the reasons you got hired and should be an influential factor in calculating salary. The rule of thumb is that the more years of experience you possess, the higher your compensation should be, as it reflects expertise and a proven track record. To do this effectively, compare your years of experience with average salary data for similar roles; this way, you will understand how experience can upgrade your earnings.
3: Consider your location
Location plays a significant role in determining salary. Professionals living in high-brow areas are prone to earn more than those in smaller cities. However, the advent of remote roles has introduced flexibility into location-based pay, causing companies to pay employees based on their work value rather than location. Research what fellow professionals in the same field are earning to align calculations with local living expenses and market standards.
4: Conduct market research
Market research is indispensable when calculating your monthly pay. Tools like GlassDoor, Payscale, and LinkedIn are resourceful when conducting this research. Additionally, industry trends and reports help gain insights into salary trends and market shifts.
5: Evaluate company size and budget
When calculating compensation, it is crucial to consider the size and budget of the company, as these factors influence earning potential. Smaller companies often have limited budgets and typically offer lower pay than more giant corporations. In exchange, they may offer perks like flexible work schedules or stock options. Carefully weigh these options when making calculations.
6: Account for benefits and perks
Aside from salary, benefits and perks can impact your overall compensation package. Health insurance, retirement contributions, performance bonuses, and stock options should come into consideration when calculating salary. Although they might not be part of your direct income, they contribute to your financial well-being. When calculating your ideal pay, consider their value and factor it in to get a complete picture of your compensation.
7: Talk to your network
People are private when discussing their earnings; be respectful and understand that they might not be willing to share this information. Those who don’t mind sharing can help you evaluate your earnings and see if there is room for negotiation. Remember to keep it professional and general.
Best resources for finding salary information
Here’s where you can check or research salary information for a specific role:
Glassdoor: provides salary insights based on employee reviews.
Indeed: offers a salary comparison tool that includes typical pay ranges for roles and locations.
PayScale uses employee-submitted data to provide precise insights on salary by role, location, skills, and experience level.
Salary.com: provides salary ranges, job descriptions, and compensation reports, including benefits and bonuses for various positions.
SalaryExpert: A resource for precise salary data beneficial for niche industries and international salary information.
ZipRecruiter: lists salary estimates based on current job listings and recruiter reports, giving insights into real-time demand and pay.
Buffer: known for transparent salary data, especially for remote and tech positions, sharing their salary formula openly.
LinkedIn Salary: allows users to submit work information and provides averages by role, location, and experience, along with insights into top-paying employers.
Setting the right expectations for your career
Calculating your salary isn't just about knowing the numbers. It is about understanding the factors influencing your compensation. Your roles, experiences, and company size are some deciding factors.
Are you looking to analyse your skills and identify potential earning gaps? Our Skills Audit Workbook is designed to help you evaluate your strengths, map out growth areas, and set realistic salary goals.
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