What is your company doing to ensure that you bring in the best talent? With the job market continuing to strengthen, you need a compensation strategy that clearly demonstrates how you’ll attract the right people. Workers in high-demand fields are comparing offers and going with what they think is best.
Without knowing where your company stands in relation to the competition, you risk losing employees. Everyone wants to be paid market price for their skill set. Understanding compensation structures and how they work with your recruitment strategies ensures that your company doesn’t get left behind.
Three Ways Forward
There are three common compensation strategies. The first is leading the market. This is typically used by companies in tight labor markets. These companies pay top dollar to attract highly skilled workers. Companies may use this strategically as well, paying high salaries during select times and then analyzing the results.
The second strategy is matching the market. Many companies seek this middle path. They don’t want their employees leaving because they feel they’re paid too little. Our research found that one-quarter of all employees would leave their jobs for a 10% raise, so maybe the median isn’t as safe as it seems.
The last strategy is to lag behind the market. This isn’t recommended. Typically, this strategy is only used by companies that lack the resources to pay their employees a fair wage.
Who Is Your Talent Competition?
In determining what your compensation strategy should be, you need to examine your talent competition. This is different than your business competition. Think about it this way: If you’re a small software company located near Seattle, you’re not competing with Microsoft for market share. But you are competing with Microsoft for talent.
Doing excellent research and comparing those findings with your compensation package are essential. This way you know exactly where your employees stand. You will know where you offer a competitive advantage and where you’re lacking.
It’s Not Just About Salary
Take-home pay is important. Everyone has financial obligations to meet. But your compensation package should be comprehensive. Maybe the small software developer can’t pay as much as Microsoft. But maybe that same company offers a flex-time program that allows employees to work from home. Maybe that same company has a robust retirement plan. There are other areas where they can edge out the competition.
In fact, a Glassdoor survey found that four out of five people would prefer better benefits over a higher salary. Things like longer parental leave and more vacation time are tools for attracting skilled employees who are interested in maintaining work-life balance.
Think about it from a potential employee’s perspective. They’re going to consider how much they might get paid somewhere else. They’re also going to think about the potential benefits and perks that come with the job. They’ll weigh these factors and make their decision. You want them to settle on your company — and stay for the long term.