How can you determine competitive pay?
As an employer , you can determine what to pay employees based on what other companies in the same location or industry offer. You can do that by researching salary data, obtaining it from public information sources or consulting your professional networks. Human resource professionals categorise competitive pay as being 10% above or below the market average for a job. A more conservative figure for competitive pay is within 5% of the market average for a job.
What other incentives can be included in a competitive pay package?
Besides competitive pay, today’s employees feel valued when offered other incentives. These incentives are unique to each company but can similarly inspire your employees. Career advancement opportunities, work from home options, paid leave , free lunches and health and fitness memberships are some incentives that can motivate employees. Any incentives you give employees will depend on your company’s size and available budget. Ensure you are prudent when introducing the incentives so that they don’t overstretch the company’s expenses budget.
How do you balance pay with incentives?
Maintain open communication with your employees so that you can find out what they love and what drives them. Have team-building or recreational activities where employees can open up and share their job-related concerns with you. Alternatively, conduct confidential surveys to gauge how employees feel about working for your company and where improvements are needed.
There are times when employees opt to forego company incentives for higher salaries, stock options, health insurance or a retirement savings plan. Discuss with employees to understand their priorities and adjust the incentives to suit their preferences. For instance, some public institutions or companies pay lower salaries but offer attractive compensation in form of allowances for hardship, housing, travel, overtime or sales commissions.
Why is it important to offer competitive pay?
Offering competitive pay benefits the employees and the company for the long term in the following ways:
Demonstrating care for employees
Giving competitive pay to employees shows appreciation of the work they do for the company. It inspires loyalty and increases employee productivity since they know the company values their well-being. Consequently, the employees are motivated to invest their time, energy and effort to make the company successful in its business for the long term. Morale among employees improves and they all collaborate on projects for the good of the company.
Reducing employee turnover and expenses
Poorly paid employees may leave your company, and it incurs extra costs to hire, induct and train new ones. High employee turnover because of low pay delays company projects and frustrates clients. Frustrated clients can end up moving their business to reliable companies. An employer who matches or pays higher salaries than the market average attracts and retains talented employees for the long term. A competitive pay increases employee morale and performance since there are fewer interruptions caused by employee turnover.
Acknowledging the importance of employees
Employees bring skills, knowledge, personality and experience that enable a company to meet its short- and long-term business goals. An employer needs to value and view their employees as assets, not expenses. As employees work at a company, their value keeps on appreciating. An employer should match an employee’s pay according to the value they add to a company. This will limit the chances of them leaving for a company that pays them in line with their expectations since they feel valued and like part of the company.
