Salary is the most common reason someone opts for a role.
It’s the most important thing to consider when recruiting for a vacancy, and next to job flexibility, it is usually the first thing people will make a snap decision based on.
This is why it’s critical for a business to establish a competitive salary when they’re posting a role. It not only acts as a screening tool for candidates, but it also contributes to a level of transparency that is becoming more necessary within the jobs market.
Below, we explore what a competitive salary is, why workers should understand what competitive means in their industry and ultimately, how businesses can properly benchmark their role.
What is a competitive salary?
Fundamentally, a competitive salary is a salary that either meets or beats the going market rate for a role in a specific industry or location.
The market rate is typically understood to be the average that a role can earn, based on existing professionals doing the same job.
In most cases, businesses will use a competitive salary to successfully attract or retain top talent, although this is generally decided by several core factors.
What makes a salary competitive?
The following factors generally influence what makes a salary competitive, with every role being affected by one or more of these things at any given time:
Responsibilities: In most cases, the job title and the responsibilities that come with a role dictate how much someone may earn working it. For example, a senior professional will generally earn more than an entry-level professional. Likewise, if two entry-level professionals work in the same or similar roles, the one who has more responsibilities will generally be able to command a higher salary.
Experience: The factor that has the second largest impact on a salary is how much experience is required. If a candidate needs certain qualifications or experiences to get a role, this will generally translate to a higher salary versus those who don’t have the same qualifications or experiences. This is particularly true in roles that need specific accreditations or qualifications, such as accountants, which instantly start earning more money when they become qualified.
Industry: While this is generally out of our control, industry and sector play a huge part in how competitive a salary is. For the last decade, for example, we’ve seen the tech and software industries offer higher salaries due to their growing popularity, competitiveness, profitability and desirability with modern workers.
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Location: The location of a role often impacts how competitive the salary is. If you’re going for a finance role in London, for example, the average salary will be significantly different to a small regional town.
Company size: The size and structure of a company can massively impact how competitive a salary is. Finance workers operating in an international business will have a much higher ‘natural’ competitive salary than those working in smaller, boutique businesses.
Market demand: Finally, salaries tend to increase as the skill set, experience, or qualifications required become more desirable. What is considered ‘competitive’ will change significantly as the role becomes more difficult or the number of people right for it decreases.
How can employers determine and set a competitive salary?
When it comes to attracting and most importantly, retaining talent, employers must understand how to benchmark a competitive salary. This is an ongoing process that may need to evolve over time as average wages naturally increase:
Research industry benchmarks: One of the easiest ways to establish a competitive salary for a role is to look at what other businesses are offering and what people of a similar skill level are earning. A great way of doing this is by using a salary guide, which often pulls together aggregates for each position and provides a number you can use.
Look at your budget: As a business, it’s obviously critical that you identify how much budget you have versus how much a potential employee is going to be looking for.
Consider adding benefits or additional perks: In some cases, a business may use a benefits package to help bump the ‘salary’ in place of simply offering more money. If your budget is restrictive, for example, you may look at offering a company car, additional training or even holiday allowances to make a worker’s compensation more attractive.
Prioritise work-life balance: In the modern world, employees increasingly look at flexibility as much as they look at the salary package. Consider the impact that factors such as work flexibility or hybrid working can have on your offering, particularly if you can’t stretch the budget to match average salaries.
How can a candidate determine their worth and establish a competitive salary?
If you’re looking for long-term career progression and earning potential, it’s important that you know your own worth and how much your skill set can earn. Here are some ways you can assess a competitive salary in your field:
Understand your worth: One of the most common things we see with candidates is a lack of understanding about what they can earn in their career. Many people are worried about standing their ground on what they’re worth, which often means missing out on a truly competitive salary. This is why it’s important to research your role, your qualifications and experience level to then establish what your peers are earning.
Factor in the entire package: While it’s important to know what you stand to earn from a purely monetary standpoint, don’t simply focus on the salary alone. The benefits package around the role may mean you’re earning significantly more than you thought.
Highlight your worth: If you have the background to negotiate a competitive salary, it’s important to do so during the application process, or you’ll struggle to negotiate a higher rate. Make sure that all of your application documents demonstrate your skill level and this is properly explained to the hiring manager or recruiter.