Staying Competitive in a Changing Salary Market
Apr 28th, 2022
“How do I know if I am paying my employees enough?” Our team at The O’Connor Group gets asked this question a lot these days. With factors like the Great Resignation, inflation, and overall job satisfaction, there is tremendous pressure on employers to make sure salaries are fair and competitive. But how can an organization do that?
One place to start is internal equity. Review your current employees’ salaries and compare people in the same or similar roles. Do they seem to be close in salary, or are there large gaps? If there are differences, ask yourself if you can justify those discrepancies. For example, some employees may have been in their role much longer, some may have been hired with more experience or certifications, and so on. If your more recent hires’ salaries are close to or even higher than your longer-term staff salaries, you may have a salary compression or inversion issue. This can happen when market salary rates outpace your internal pay increases. If this is the case, you should consider adjusting your current salary ranges and pay increase practices.
Looking at the external salary market is also critical to ensuring your salaries are competitive. There are numerous salary surveys that you can participate in and, in return, gain access to a wealth of salary data. Free salary data is also easily available on the Internet, but keep in mind that data may not be as reliable as other paid sources. We recommend gathering data from several sources for a more accurate and holistic view. Keep in mind that the market has changed significantly in the past year and even in the past few months, so if your job candidates are demanding higher rates than your benchmarking data indicates, you might need to be flexible with your ranges.
In addition to internal and external benchmarking, inflation is a very hot topic to consider right now. According to Bloomberg, inflation has hit a 40-year high rate of 7.9%. However, Korn Ferry’s recent Global Rewards Pulse Survey indicates that the median planned salary increase in the U.S. this year is about 3.5%. While you may want to plan this year for a higher salary increase than you normally would, we are not necessarily seeing salaries increase at the same rate as inflation.
As always, don’t forget to tell candidates and current employees about all the other great non-salary rewards you have to offer. Bonuses, medical benefits, paid time off, 401(k) plans, hybrid or remote work and other perks can be very desirable for many job seekers, and you’d be surprised how many current employees may not know about all the benefits they’re already getting. Consider implementing total rewards statements to show your team members the value of their overall compensation package.
Lastly, while competitive pay rates are the goal, requests for salary increases are sometimes a symptom of deeper issues. When an employee requests a raise, it may not be that they aren’t being paid enough, but that they aren’t being paid enough to deal with what they are being asked to do. Maybe it’s the workload, the hours, a difficult boss, or working on-site instead of remote. Take a look at your work environment and remember that both fair pay rates and great company culture are your best bets for attracting and keeping great employees.