Is “Competitive Pay” Good Enough?

Compensation is one of the biggest factors a potential employee will look for in an open position. Contrary to popular belief, it’s not the only thing they’ll look for – telecommuting, great benefits, stock options, potential for growth, and more are all going to play a key role in their decision. But good compensation is what all employees are looking for.

Compensation tells an employee a lot about their place in your company. Since most companies aren’t sure how much they want to offer a new hire, they write “competitive pay” in the section on compensation, not realizing that their pay is not actually competitive.

The Problems With Poor Compensation

All companies want to decrease their expenses in order to increase their profits. But paying someone less than they deserve or expect can have pretty drastic consequences on your recruitment, including:

• Turning Off the Best – Your absolute best talents may be expecting more money from their work. Employers that are either unwilling or unaware of how much their talent brings to the company are going to offer less than the best applicants deserve, and in many cases this will get them to turn down a job quickly. It may even cause YOU to want to avoid hiring THEM because you think their salary demands are too expensive, when in reality they are asking for their market price and you are undervaluing their contributions.
• Pay Minus Perks – Other companies do offer competitive pay, but nothing else. For example, perhaps the average employee in the position earns $65,000, so they decide to hire $68,000 to be “competitive.” But if that company offers fewer benefits, fewer perks, or fewer reasons to work for their company, the reality is that $68,000 is too low, because other companies offer much more. A “Competitive Salary” has to take into account the other benefits you’re offering.
• Likelihood of Seeking Competition – Recruitment doesn’t end after the hire, either. Employers that do not pay their employees a competitive wage are at risk for losing the employee once they find work elsewhere. Competitive pay keeps employees in the long term, and so an offer that’s good-but-not-great opens the door for another company to steal them away.

In some cases poor compensation is not your fault. For example, you may assume that you’re opening up a lower talent position in your company and asking for someone with a specific ability, and most people that have that ability are used to being in higher positions in companies and getting paid very well. The task itself may be simple, but the value associated with that task may be high, and you may not be aware of these compensation differences.

Nevertheless, learning how to offer truly competitive pay can make a big difference in your recruitment efforts, and it’s important that you examine how much you’re genuinely willing to offer and how much you can afford before trying to advertise to the top talent.

 

For you recruitment concerns and employment branding you may contact Employment Office Australia at info@employmentoffice.com or visit our website at www.employmentoffice.com.au.