If only Jessie J were right, and we could forget about the price tag; unfortunately, when it comes to attracting quality job candidates and retaining the best employees, it often is about the money (money money).
“You can’t attract a lot of people if you’re not willing to pay market price,” says Ellen Silva, director of workforce analytics at CareerBuilder. Silva works with clients to determine the most competitive pay rates, which serve to not only attract high quality candidates, but reduce turnover as well.
Determining the “right” compensation, however, can be tricky: Not only is money a touchy subject (and something employers are reluctant to part with), but so many factors play into determining compensation rates that are both fair and competitive. Here, Silva discusses the factors that influence compensation rates the most:
1. Years of experience and education level.
It probably goes without saying, but the more experience and education candidates have, the more money they can command. “If you put ‘master’s preferred’ in the job posting, you need be willing to compensate for that,” Silva says.
Depending on the industry, you may have to pay vastly different wages for the same skill sets.
Location can drive compensation rates up or down, depending on the cost of living. “We’ve seen many banks move their call centers to Utah, where they can pay them less, because the cost of living is much lower and compensation is not as competitive,” Silva says.
4. Skill sets.
When it comes to determining compensation, it might seem like second nature to search by job title; however, searching by job title can be unreliable. After all, a product manager at one company could have a vastly different role – and require a different set of skills – from a product manager at another company. Usually, when we show our clients how to use the compensation portal, we advise them to search by key skills. They can then filter those results by years of experience, education or a number of other qualifiers, and really drill down to get the most accurate results.
5. Supply and demand.
It’s crucial to be aware of the availability of talent for the position for which you’re recruiting. If you’re recruiting in an area where the supply of talent outweighs the demand, you should expect to pay more in order to lure talent.
The Cost of Not Offering Competitive Pay
You may think you’re saving money by keeping compensation rates low; however, it’s important to consider what it’s costing you in other areas. For instance, how much money are you losing by keeping a position open? And how is the burden of taking on more work to compensate for the unfilled position affecting the morale of your current employees?
“If you can’t offer competitive compensation rates, not only are you going to lose out on great hires, you’re also going to lose current employees.”
What Happens if You Can’t Pay Market Value?
Of course, it isn’t always all about the money, which is good, because offering the most competitive pay rates isn’t always an option. Supplementing your compensation package with low- or no-cost perks, such as development opportunities, more vacation time and flexible hours, can definitely help retain your current workforce. Another option is to consider recruiting from areas where compensation rates are lower, and let employees work remotely from home or from another office closer to where the employee lives.
Take the Guesswork Out of Determining Compensation
Unless you’re an amazing guesser, it’s important to do a little recon when it comes to determining competitive pay rates. Competitive intelligence is your best friend when it comes to determining compensation, according to Silva. She suggests using a third-party resource, such as CareerBuilder’s Supply & Demand Portal, that provides up-to-date and relevant compensation rates for even the most specific of positions. You should also be able to see where compensation rates may be lower or higher (if you’re considering recruiting in other location), and – perhaps even more intriguingly – get a peek at what your competitors are paying.
Learn more about recruitment analytics that can amplify your sourcing strategy.