Ask any business where salary ranks in importance for attracting and retaining talent, and you’ll likely get a range of responses. Some will say pay is the most influential decision an employer can make when it comes to talent management, while others will tell you it’s only a piece of the puzzle, and that as long as it’s fair, you’ll keep staff on board.
Wherever you fall in your opinion, it’s still essential to know whether you’re offering a competitive salary. Employees talk to employees at other companies, and they certainly can do the necessary research to determine if you’re paying them what they’re worth.
To ensure you’re setting compensation at a competitive level, we recommend you do the following before posting your next job opening:
1. Calculate 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. If there’s a particular position you’re trying to fill, just ask our team. We have access to salary reports and compensation surveys to make the decision that much easier.
2. Get to know the market.
Employers often develop pay practices based on comparable jobs at comparable companies. So, it’s essential to pay attention to trends not just in your industry but region. Both Payscale and Glassdoor can be great resources, but you can also use the Bureau of Labor Statistics to research pay 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.
3. Weigh the value of the position.
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, time commitment, etc.
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 business. Obviously, the greater the benefit, the higher the value will be. And salaries should be at least commensurate with this value.
4. Determine how you’ll pay.
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.
Related: The Impact of Minimum Wage Increases
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.
No matter how you decide to compensate employees, arriving at competitive compensation ranges will take time. It’ll also take some flexibility on your end, even after you’ve established a scale. Your salary ranges will need to bend and adapt to candidate in question if you want to attract and retain the best of the best. Otherwise, you could lose top talent to a competitor.
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.