How HR can set salary ranges that Attract and Retain Top Talent without Breaking the BankOct 24, 2022
All too often, the compensation strategy of a business is to pay what the most recent candidate is asking for and hope your other employees don’t realize how high you went. That strategy is not going to have long-term success and may chase away your best employees. Employers must be strategic about setting salary ranges that attract and retain top talent but don’t break the bank or alienate current employees.
As business leaders, you must strategically identify which positions in the organization are critical to your success and which you might have more flexibility in training and utilizing less experienced talent. You must consider the external marketplace, especially when candidates are difficult to find. The pay structure should ensure that your current employees are rewarded for their skills and commitment to the organization. Finally, all these concepts have to be wrapped in your company culture and communication style.
So how do you know if you are offering a competitive wage and appropriate salary range? The informal sign will be through turnover of current team members and level of negotiation that is occurring when you are making job offers to candidates. And if you listen closely, you can gain a great deal of information from candidates during the recruiting process on what others are paying for similar positions.
One decision you need to make as a business is just how formal you want your salary plan to be. Large organizations tend to have many salary levels and ranges for positions that have been assigned to each level. These systems create parameters for managers to both hire and reward their teams. In smaller organizations, it is more common to have ranges that you are willing to pay for various positions. These are typically not published, but used as a guide for managers and HR.
One critical component of salary system evaluation is to review market data to have objective information for various positions. There are some easy to access websites that will provide data on salary and benefits. Two free resources we recommend are:
A comprehensive site that has data by zip code, allowing you to access information for your specific area. The site does derive its data from the employee, so for many compensation experts, it is not considered to be as accurate as other forms of compensation research. However, there are three reasons that it continues to be a resource for the small business person.
- While self-reported, the ranges shown for positions are within very close representation of the same position in more formal (and expensive) salary surveys.
- Employees and candidates are looking here to validate their pay. Don’t you want to know what they are looking at, and can have a conversation with them about why their pay may differ from what they see on this, or other publicly available websites?
- It’s free - virtually anyway! To get more extensive data they will offer a paid service, but the free information is all that is needed to get an idea of what an employee or candidate should be paid.
This is a service provided by the US Department of Labor which has compiled a great deal of data regarding occupations in the United States. The site is continually updated, which allows you to access real-time data collected by the Department of Labor. You can use O*net for:
- developing effective job descriptions
- defining employee and/or job-specific success factors
- aligning organizational development with workplace needs
- refining recruitment and training goal
- designing competitive compensation systems
The system is completely free and used by candidates, employees and employers alike. They have updated the portal, and it is easy to use and provides a wealth of information.
In addition to these publicly available sites, be sure you contact your specific industry association for compensation and benefits data. They should have an annual survey that you can purchase, utilize or have access to as part of the membership package. Often they will ask for participation in the survey to receive the results at a reduced fee. If so, this is time well spent.
Once you have the market data, consider the impact on your overall business. This would include a review of current salaries to determine if current employees are being paid at the market rate. All positions should have a range for the salary based on experience, expertise, and market demands. You may select certain positions to pay at the top of the market where talent is hard to find and critical to your success, and other positions that are more easily replaced, paid at the bottom of their range.
The compensation plan and salary ranges should also take into consideration your overall benefits program. The employee marketplace today put a high value on paid time off, health insurance and other programs that are offered as part of a total package. Reflection of these programs will guide you into the salary ranges that provide a total compensation rate that is appropriate.
The data from all sources will drive all compensation and salary range decisions going forward. The figures should be reviewed annually, although it is most common to increase all salaries by a flat percentage in future years, and only undertake a full evaluation every 3-5 years. However you arrive at your final salary ranges, the critical component is to have an objective compensation system employees can count on for their career development within your organization.
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