Written by Heather Bussing
September 22, 2022
Competitive pay is the compensation that is close to what other organizations pay for similar work in that industry and market. More simply, it's compensation that would meet or beat your competitor's offers for the role.
There are many ways to approach compensation and finding the right mix for the moment is more about people than money.
Competitive pay is a big part of how you hire and retain employees. When a candidate has multiple offers for similar roles, compensation is a major consideration for someone deciding whether to take the job. This is especially true if other considerations like location, team, and company culture and mission are similar.
Salary is just one piece of competitive pay. For many people, flexibility, autonomy, and employee benefits that provide help, security, and support things people care about are what matters most.
The 2022 Financial Mobility Survey by KeyBank indicates how employee priorities have shifted since the beginning of the Covid-19 pandemic. Sixty-two percent of the survey respondents said that work-life balance was most important to them. Only 22% said it was a high-paying salary.
Often companies have bargaining power that individual employees don't have for better insurance rates and discounts on services and major purchases. They can also implement policies, establish programs, and support causes that make a real difference for employees.
Competitive pay is anything that would benefit employees. It's the complete compensation package that can include:
Time and money are powerful tools to make both work and the world a better place. When you give people the ability to choose what is meaningful and useful to them and provide resources to help them, you will stand out against organizations who haven't given it much thought.
Competitive pay involves comparisons with other organizations' total compensation. It does not mean that every part of the compensation package needs to be equal or even included. To have a competitive advantage, the pay should be distinctive in one or more elements of compensation.
To figure out what will get your organization noticed consider:
What is the market pay range? Research what other companies are paying for similar roles in your area. Benchmark your pay range and see if it needs adjustment.
Are you struggling to hire? Different things matter to different people. Some care more about money. Others would rather work at home or have more generous time off.
Having a mix of money, time off, and choices for benefits means you will have the widest range of candidates to choose from and you are not excluding people who don't have kids or commutes or workout routines.
What are the options? If you're not sure what's available besides money and paid time off, research the latest trends in benefits and see what options are out there. With Covid has come a new focus on expanded insurance coverage for mental and physical health, disability coverage, medical travel benefits, and air quality and filtration at work.
If you want people to return to the office, look at helping employees with childcare options. And don't forget the school kids who can't always go to school.
There are lots of great people and resources who can help you put together a list of great benefit choices.
What do employees use and want? Look at what benefits your current employees use and don't use. Then survey employees to find out what they would like. Be sure to set expectations so you don't get people's hopes up for things that won't be offered because of budget or practicalities.
Are you recruiting to improve diversity? Consider what benefits or working environment would let people know they are welcome for someone who is:
Talk to people. Ask them what benefits or policies would help them in their unique lives while doing great work. This is different than individual accommodation under disability laws. This is about exploring what people who have different experiences of the world would find useful, meaningful, or delightful.
Get good advice. Some benefits are tricky. You can't just decide to offer retirement benefits and allocate some money. If you are shuddering reading this, you know.
Paid time off can also have big consequences that aren't always obvious. For example, many states require employers to pay out any unused vacation time at termination. This means that increasing vacation time can create a growing liability for unused vacation, which can also affect the organization's finances. There are ways to handle it such as requiring employees to take time off or limiting the amount of paid leave that rolls over. But it depends on state law and getting it wrong can have significant consequences.
Make sure you explore the pros and cons with people like legal, finance, and compensation who are experienced and knowledgeable in the area.
Assess Pay Equity. Any time you make significant changes to compensation, including pay ranges, it can affect pay equity in your organization. It's important to understand the effect of competitive pay initiatives on both budget and compliance with pay equity and other discrimination and wage laws.
The bottom line on competitive pay is that it's not all about the bottom line. Get clear on what matters to new and current employees. Understand the market. Then get creative and resourceful about what's possible.
Competitive pay is not just about money. It's about showing you care.
Download our white paper to further understand how organizations across the country are using market data, internal analytics, and strategic communication to establish an equitable pay structure.