You may think you offer competitive pay, but do you know for sure?
In a 2018 survey, Indeed found that more than half (54%, to be exact) of respondents would consider changing jobs to get a pay raise. There are two sides to this statistic to consider.
On one side, if you could be at risk of losing half of your staff because they can get more money elsewhere, isn’t it worth knowing for sure if what you offer is in line with your competition?
And on the flip side, if you could draw a top performer away from their current job because they are underpaid, wouldn’t you want to do that?
One of the biggest success differentiators a company can have is its people. Getting compensation right is a key component to attracting and retaining top talent.
Read on to learn how to know for sure if your pay is competitive.
The Pay/Motivation Link
Research tells us that money doesn’t motivate people in most jobs today. What compels workers in the current information age to do their best are intangibles such as control over key aspects of their work, the ability to become competent in what they do, and doing meaningful work.
However, being underpaid is a demotivator. It’s like having a rock in your shoe–it’s nearly impossible to think about anything else.
If that rock isn’t removed with a pay increase, they may quit if they can make more doing similar work elsewhere. Filling that open position takes time and costs money.
But what may even be worse is if they don’t quit but instead choose to “quit and stay.” A person who quits and stays chooses to stay in the job, but their productivity is low, and their negativity brings other people down.
Paying incorrectly can work in the reverse as well – you could be paying some people too much, which obviously could be costing you money that you shouldn’t be spending in the first place.
If you don’t know what competitive pay is for a job but regularly grant raises and promotional increases, you could end up with people who are earning more than what is appropriate for their position. This is an unnecessary expense.
Now that we know how offering competitive pay saves you time and money, let’s talk about how to do it.
The What, When, and How of Market Analysis
There are many components of a solid compensation program. One is doing a competitive market analysis, which determines the competitiveness of employee pay and can become the basis for creating or updating pay ranges.
It involves matching the jobs in your organization to similar positions in the labor market from which you hire employees. Salary surveys are used to find market data.
It is usually enough to do a market analysis of all positions every 2-3 years. However, there are times when certain jobs are in high demand, which will warrant a more frequent analysis of those positions. In industries that are evolving more quickly, such as technology, it’s important to watch the change in pay of positions closely in order to ensure that you remain competitive.
You’ll also want to make sure you’re doing a market analysis when you create a new position in your company to make sure you’re not starting people off at the wrong pay right from the beginning.
You can conduct a market analysis yourself, but analyzing compensation data is not typically straightforward and can be time-consuming. There is a whole body of knowledge and expertise in the field of employee compensation.
Therefore, most organizations turn to their HR department–if they have experience doing compensation market analyses–and if not, they turn to consultants who have the compensation expertise.
Take the Lead
If doing a market analysis hasn’t been a priority, you’re in good company. It’s an area that is frequently overlooked, particularly by small, mid-sized, start-up, non-profit, and rapidly growing organizations.
The good news is that you now have the information you need to set your organization apart when recruiting and to reduce employee turnover.
How have you seen pay act as a demotivator for yourself, colleagues, or your team members?
You can leave your answer in a comment below.
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