What if I told you there was a trick to finding professional, qualified, hard-working employees for your business? Now, what if I revealed that this trick is as quick and simple as adjusting your employee’s wages? With our country’s current staffing shortages, companies have been competing to attract the best staff members for their teams. But what few might realize is that setting competitive wages for their employees may be the key solution to their staff recruitment problems.
Recently the multinational technology company Amazon had to implement competitive pay as a new onboarding strategy in the current labor market. According to Amazon’s chief financial officer, the company found it beneficial to use a competitive wage and benefit package to fill their open positions. Though this came at a cost to the company financially, it has helped satisfy the demand for workers for this growing company. By setting competitive wages like these businesses can attract more members to serve within their workforce, even in the current labor market.
Competitive wages are a hot and important topic these days when it comes to employment and hospitality staffing, but what does this mean?
What Does Competitive Pay Mean?
Competitive pay refers to a compensation package that is comparable to the industry standard for that market. A competitive wage is valued as equal to or exceeding the industry standard offered for similar industry positions in the same geographical area.
Offering competitive pay is an effective way for an employer to attract and retain qualified members for their team. When developing a competitive compensation package for your employees, it is best to first consider what perks are most likely to keep your workers satisfied with their employment, so that you can adapt your strategy accordingly.
Why is it Beneficial to Offer Competitive Wages?
The effects of the COVID-19 pandemic left businesses in dire need of workers, and employers have been out in full force recruiting staff members. Still, U.S. Bureau of Labor Statistics reports have shown that finding employees has been increasingly difficult in 2021. While companies have been struggling through the staffing shortage, workers have been benefiting from it. The influx of available positions has allowed them to negotiate pay opportunities and push for raised wages, rather than accepting lower or minimum wage amounts. The companies that don’t comply with the worker’s desired compensation amounts have had a harder time attracting new employees.
Competitive pay does more than just spark interest in prospective applicants for your company, it is also a sign of commitment to your employees. Higher pay and more benefits for employees can result in increases in productivity and engagement, as they will have more incentive to do their jobs well and retain their positions.
Providing pay increases for your employees can result in raised operating costs. However, paying your employees only the minimum wage amounts may cause employers more in the long run. Oftentimes employees leave their jobs when they find similar positions with better compensation packages. Losing workers negatively affects company culture, which could lead to more employees following suit. Loss of workers also means that businesses must fill those open positions, resulting in more onboarding and training costs for new employees. Providing competitive pay can reduce employee turnover, as your workers will be less inclined to leave their positions in favor of benefiting from a more valuable compensation package offered by another company. Quality employees are an investment, not an expense, and businesses can save money by offering competitive wages to attract and retain quality staff members.
5 Tips for Setting Competitive Wages
Setting competitive wages can help you attract more workers for your business. To make sure you are setting compensation at a competitive level, you should consider factors like supply and demand, geographic location, comparable companies, employee benefits, and benchmarking internal wages.
Consider Supply and Demand
Calculating an accurate competitive wage requires the consideration of employee supply and demand. Supply and demand for employees can vary based on industries, with some showing employee demand to heavily outnumber supply, as seen with tech and hospitality trends. Supply and demand levels may also depend on the job that needs to be filled. Positions requiring highly specific skills or experience can be more difficult to fill, and if a business receives few qualified applicants for a job, raising their compensation rates may be helpful.
Staffing platforms like Adia can help businesses stay competitive based on employee supply and demand. Adia warns employers when the proposed job pay amount in their Adia job posting is below the average amount generally required to receive any attention/applications from workers. Adia’s hiring data allows them to provide employers with useful information, so they can offer the best competitive wages to gain job application traction.
Consider Geographic Location
To calculate an appropriate and effective competitive wage for your business, your geographic location must be considered. A competitive wage should be similar or equal to the compensation offered by similar positions within the same geographical area. Salaries can vary greatly from state to state and even city to city, and a compensation package typical for a job in one geographical area may be completely different from a compensation package for the same job in another. This can be due to differences in factors like costs of living, if one location has a higher cost of living than another, its competitive pay is likely higher as well.
To research pay rates and find the cost of living in your area, it can be helpful to search for similar job positions in your area online. If you are having trouble with restaurant recruiting, for example, researching nearby restaurant industry job descriptions may provide you with some useful insight. Once you have compiled information on the salaries offered by job listings, you can add the salary amounts and divide them by the number of job listings to calculate a median salary. This will give you a clearer picture of what people will expect to make working at this job position in your area.
Research Comparable Companies
Websites like PayScale, Glassdoor, and the Bureau of Labor can be great resources for determining the average pay for certain jobs in specific industries. These websites help you to find out what the market is paying for these positions and may even let you search for job salaries specific to different geographical regions. This can be especially helpful when considering the cost of living for areas especially. Businesses in areas with higher costs of living must set their competitive wages higher to attract and retain talent, a practice that extends even to service sector jobs. Workers want to know that their job will pay them at least the minimum wage amount necessary for them to support their lifestyles securely and cover their expenses while living in that location.
Money Isn’t Everything
Money isn’t the only way that employees can be compensated by the company they work for. Many businesses offer competitive compensation packages that include valuable benefits, rather than only including a competitive hourly rate. When determining a competitive wage for your company, it is wise to take the benefits offered in other businesses’ compensation packages into consideration. Typical benefits that can be built into a compensation package may include paid time off, paid sick leave, gym memberships, parental leave, health insurance plans, dental or vision insurance plans, retirement plans, and more. Providing competitive compensation packages to your team members can be a great way to and attract and retain talented employees.
Benchmark Internal Wages
Benchmarking internal wages can be helpful when ensuring that you are providing competitive wages to your employees. “Benchmarking” means viewing and comparing your company’s internal job descriptions with external jobs that have similar responsibilities. By considering the compensation packages offered by your company as compared to the compensation packages for similar jobs circulating the market, you can get a better idea of whether you should raise your workers’ wages for that job, and if so, by what percent. It is recommended that companies benchmark salaries at least once per year to calculate competitive pay and attract and retain employees. Keeping employee satisfaction and loyalty high with competitive pay means avoiding employee turnover, and the hiring and training costs that come as a result.
Final Thoughts on Setting Competitive Wages
Setting competitive wages is an effective way for businesses to attract new talent for their workforce and retain dedicated employees. Businesses can accurately determine the best competitive wages for their positions by considering factors that affect employment trends.
If you want to skip the trouble of calculating competitive wages yourself, the Aida staffing platform is here to help. Aida helps employers develop effective job descriptions with competitive wages to find qualified workers for their business. View the Aida site to learn more about how our on-demand service can assist with your workforce needs.