Salary is often the most important factor in attracting and retaining the best employees, yet many companies still find it challenging to arrive at a competitive scale.
Part of this has to do with all the facets you must consider when hiring for a job. What sort of skills are you looking for? Is there a particular career level for the ideal candidate? What’s the state of your budget? Is the economy improving or in decline? And that’s just to name a few.
With so many questions, the decision of where to set the wage just gets more and more complex. Here are some essential elements to consider when trying to arrive at a competitive pay rate:
1. Review the median wage.
Before you can even think of setting a competitive salary, you’ll want to determine the median wage for the position — “median” being the operative word here. Median will give you a clearer picture of what people will expect to make, as it’s the midway mark between the highest and lowest salaries.
Determining median wage will also tell you whether your organization can actually afford to hire for the position and how experience, education, and qualifications might influence pay. Our team can help run the numbers and provide access to compensation surveys and salary reports to ensure you set a more competitive salary.
2. Get to know your market.
Companies usually develop pay practices based on comparable jobs at comparable companies,so it’s important to keep an eye on trends not just in your industry but region. Both Payscale and Glassdoor are excellent resources, but you can also use the Bureau of Labor Statistics to research salaries by state and job characteristics.
What’s more, companies in areas with higher costs of living must set salaries higher to both attract and retain talent — extending even into service sector jobs. Sure, the pay for these jobs will remain low in comparison to those offered to the more skilled workforce, but still higher than the “average” service worker.
After identifying median wage and market factors, the next step is often to gauge the value of the position in question. Value being relative, it’ll require you to create a job description beyond its formal title. Outline the expected skills, background, and experience, as well as duties, responsibilities, and time commitment.
With this information in hand, think about how much time and energy the role will demand in your organization and the ways in which the person’s contributions will benefit your business. Obviously, the greater the benefit, the higher the value will be. And salaries should be at least commensurate with this value.
Money is only a portion of any competitive compensation package. You’ll also need to find other ways to sweeten the pot for employees. Some of the most common “perks” include health insurance, bonuses, stock options, and commissions, but you may get more mileage out of gym memberships, tuition reimbursement, unlimited PTO, or parental leave beyond what’s required by law.
Offering employees more than a paycheck can often give you a bit more wiggle room when setting salaries. In fact, some of the most sought-after talent will accept less pay for these sorts of fringe benefits. For example, 76 percent of Millennials would take a three percent pay cut if the employer offered flexible office hours.
5. Benchmark salaries.
“Benchmarking” is the process of comparing internal job descriptions with external jobs of similar responsibilities to ensure salary is competitive with the market rate. This is especially important for any position with a high risk of turnover. Benchmark salaries at least once a year to not just attract and retain talent but maintain employee satisfaction and morale.
After all, the cost set aside to pay for turnover and training can often be allocated to fund your competitive salary if you set salaries competitively from the start. The majority of those turnover and training funds are no longer needed when you’re able to retain talent over the long term.
When you’re trying to attract and retain the best of the best, understand that your salary ranges may need to bend a bit. Setting them in stone could lead you to lose out on top talent, so make sure every candidate is considered on a case-by-case basis.
If you’d like to learn more about how to set a competitive salary, or need help recruiting a position, please let our team know today. We’d be more than happy to schedule a meeting to discuss your options.