How much you pay yourself as a business owner will have a remarkable impact on your personal and professional life. Many business owners struggle with the concept of paying themselves a wage because they think, as the owner, they should only be taking profits.
Most business owners don’t actually mind how much they are paying themselves because they are reinvesting it back into the business. However, in order to grow, it’s often essential to take on a business partner and this is where it starts to get tricky.Imagine you take on a 50/50 financial partner but they only work half the number of hours as you or their skill level is lower than yours. In each of these two cases, it makes sense for you to be remunerated at a higher rate than your partner. But how do you decide how much is fair?The best solution is to consider how much it would cost to hire someone to perform the same job and pay yourself that much. That way it’s fair all round. Equally, the same thinking could be applied to your new business partner too.The best way to pay yourself is by a salary with super attached. This way, you’re accumulating all the benefits an employee is due and all is fair and above board for your partners to assess.
Another benefit of paying yourself regularly is the sense of satisfaction everyone deserves from a fair day’s pay for a fair day’s work. This gives people a sense of achievement, keeps morale up and productivity too.
So I hope that’s helped. Of course things can get a little complicated sometimes when considering PAYG, the structure of your business, balancing salary with dividends, whether or not to take stock options or bonuses and all of the tax deductions employees are due. So give me a call, and I’ll walk you through these complexities and suggest a sensible way forward.