With so many factors influencing hiring, it can be hard to tell if the pay you're offering is helping or hurting your attraction and retention efforts. Did that candidate ghost you after the interview because they were exceptional and found higher pay elsewhere? Or do the skills you're recruiting for require a better wage? These are critical questions to ask if your organization is to offer competitive pay to prospective talent and build the workforce it needs to thrive.
What is competitive pay?
Competitive pay refers to a salary or wages that are at least equal to the industry standard for a particular role in a specific job market. You can effectively compete with other employers for the same talent when you offer such pay.
For example, let's say that the median salary for technical writers in the Texas aeronautics industry is $90,000. If your organization operates within this industry, offering less than $90,000 would dull your competitive edge because candidates would likely gravitate to other prospects. However, if you provide more than $90,000, you'll probably attract more and higher-quality talent than your competitors.
Why is competitive pay important?
Competitive pay is key to attracting and retaining talent. If your organization doesn't offer enough, the talent you want to hire will likely go elsewhere.
In a joint effort with Harris Poll, CareerBuilder surveyed thousands of workers and hiring managers and discovered quite a bit when it comes to compensation. Among candidates who have ghosted a new employer, two-thirds say it was because they found a job with higher wages or better benefits. Pay is such a strong factor that more than one-third of current workers expect more than a 5% salary increase each year, and twice as many look for such a raise when switching jobs (and many people are switching jobs).
How to determine competitive pay
Offering too little drives away talent, and giving too much affects your organization's bottom line. Striking the perfect balance between the two is ideal. Here's what you can do to ensure you're pricing right:
Account for the cost of living
If the pay you offer isn't enough to cover a candidate's bills, that individual has little incentive to take the job. Our survey found that 39% of workers rely on side jobs to make ends meet. The offer of a position with remuneration to match the combined value of an employee's full-time and side jobs might encourage them to ditch their current employment in favor of the higher-paying prospect.
With that in mind, when determining what qualifies as competitive wages, one of the first things to consider is the cost of living in your hiring areas. The internet has several free tools to calculate an area's living costs, such as the city comparison calculator and nifty living wage calculator.
"Pay is such a strong factor that more than one-third of current workers expect more than a 5% salary increase each year, and twice as many look for such a raise when switching jobs."
Let the market guide you
Labor market data can give you a snapshot of the position you're hiring for and how strong of an advantage candidates have. For example, the CareerBuilder Supply and Demand portal uses 150 million data points from thousands of clients to show how easy or hard it will be to attract workers in real time. If you're in a particularly hard-to-hire industry or market, it can also show you how much you need to increase pay to edge out competition.
Consider internal priorities
You also need to look inward at your organization's means and hiring needs so that the salary you offer is within your budget. Unless your organization has the money to spare and knows how to extract the maximum value from the positions you're recruiting for, you probably want to set a base pay rate that's simultaneously above the market rate and as close to it as possible. That way, you can attract a higher class of talent without overspending on the effort.
Tips for attracting talent to your organization
Wages aside, here are some approaches you can take to attract top-quality candidates to your organization:
Be upfront in your job postings
One of the simplest ways to attract talent to your organization is to be upfront about your pay ranges on all your job postings. According to our survey, 74% of job seekers say it positively affects their decision to apply. Being upfront about compensation also gets your advert in more search results, ultimately reducing time to fill.
Balance wages with benefits
Maybe your organization doesn't have the budget to match the industry standard, or you can offer just enough to be competitive. In that case, you can still outcompete other employers with your employment benefits. Aside from the standard inclusions of insurance coverage and retirement plans, you may consider providing perks such as:
- A pet- and child-friendly office
- Generous or unlimited paid time off
- Parental leave
- Tuition reimbursement
- Professional development opportunities
- Stock options
- Regular bonuses
A flexible work model
One surprising statistic is that the majority of workers are willing to take home less money if they can work remotely. According to a 2023 poll by the Washington Post and Ipsos, 55% of fully remote workers said they'd take a pay cut if they could continue working from home. This may be due, in part, to the costs associated with in-person work — commuting, lunches, a professional wardrobe — while another factor may be the mental and emotional well-being that comes with working in a comfortable environment.
Offering competitive pay is essential if you want capable talent willing to stay with your company for the long haul. However, alternative forms of compensation and a commitment to transparency can also attract top candidates who value non-monetary factors. Developing the right and most profitable workforce for your organization depends on finding a balance.
More tips on hiring and retaining talent
An employee should bring value to a company, but the organization should likewise provide value to its employees. That's where an employer value proposition comes into play.
Data can help your organization make smarter hiring decisions, especially when you're trying to measure a candidate's experience.
Abstract qualities, such as company culture, may inform whether a candidate will stay with your organization.
