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The salary landscape has become somewhat murky since the pandemic fueled remote work. What impact has this had on efforts to pay a fair wage? What steps should organizations take to ensure salary practices are competitive and appropriate to attract top talent? To what sources of information should they turn to assess the competitiveness of their salary practices? What worked and what no longer works?
Here, we examine these questions and offer some advice for employers operating in an increasingly competitive talent market.
It all starts with your compensation philosophy
All employers have a compensation philosophy, whether they have it clearly stated or not. In short, are your compensation practices ahead, behind or in line with the market? There is nothing inherently right or wrong in any of these philosophies. There are, of course, different results to be expected.
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For example, taking on a leadership role could make your company more attractive to job applicants, but could result in overspending to attract talent. Conversely, if you are lagging the market, it will be more difficult for you to find qualified employees who will stay on board for the long term.
Perform job analysis and update job descriptions
Your compensation approach should support and align with your organization’s strategic goals. Based on these goals, you will then evaluate the various jobs in your organization to determine how well they help contribute to or drive organizational goals. For example, a salesperson in a B2B sales organization is likely to contribute more than a billing clerk in that same organization. All positions are important; performing a job analysis is simply a way to determine relative the importance of the different jobs you are hiring for.
It is also important to ensure that job descriptions remain up to date. As skill requirements change and new technologies emerge, the way jobs are performed also changes, and so does the relative value of those jobs.
Identify the reference professions
Small organizations may only have a handful of jobs that need to be assessed. In large organizations, however, there can be hundreds of jobs and the job descriptions that go with them. In these organizations, benchmark jobs are used as a point of comparison.
These can be the most prevalent jobs in your organization, hard-to-fill jobs, or jobs selected based on other criteria that make them important to securing competitive pay rates. Typically, they would represent the highest paying jobs, as other jobs within the organization would have salaries set against those positions.
Determine the market in which you will recruit
Some positions – for example, retail clerk or bank teller – are likely to be recruited from a local market. Other positions, like web developers or C-suite executives, are likely to be recruited from a much larger regional, state, national, or even international market.
The experience of the pandemic has had a significant impact here. Prior to March 2020, many organizations could have said that a significant portion of their workforce had to come from a relatively local market. Now, however, we have all learned that many jobs can be done remotely across the country or around the world.
Determine salary ranges for the positions you will be evaluating
To determine market-based salary ranges, companies should research what other organizations are paying for similar positions. This information may come from professional organizations, surveys conducted by compensation consultants or other sources.
Salary surveys, once a go-to source for relevant and reliable salary information, are no longer as influential for several reasons. First, these surveys tended to lag behind by a year or two, which means that in a rapidly changing market, the data is no longer likely to be accurate or up-to-date.
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Additionally, the impact of the pandemic and a sudden increase in remote or hybrid work has complicated the salary landscape. Due to these changes, some companies are taking a national or international approach to setting wage rates. This would mean that an employee working remotely from a small town in Montana would be paid less than one working remotely in Manhattan due to cost of living differences. (I’ve seen Google practice this.)
An important first step in determining whether compensation is competitive is to monitor competitors. Their job postings, listings or advertisements may contain salary information. In some states and locations, pay transparency is becoming a requirement. Starting May 15, for example, New York City will begin requiring employers to include salary ranges in job postings.
Glassdoor, Indeed, and PayScale are popular services for getting data on salary and compensation trends. Although sources like these are powered by employee feedback and may not be as reliable as other sources, they can state what your candidates are likely looking for when doing their own research on what they are worth. LinkedIn Salary is another source of salary range information that prospective employees often turn to.
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The length of time a job remains open may be taken into account. Just like when selling a house, the actual demand received can be very telling. With open jobs, if you get a lot of interest very quickly, you can be above the market; conversely, if your job openings remain open for long periods of time, you may be offering below-market pay.
A continuous process
In the end, although money is important, it is not the only something that is important to employees. Be creative in crafting a compensation and benefits package that provides value to employees, and be upfront in communicating the value of this package and other amenities offered by your company.
Assessing salaries to ensure competitive positioning is not a one-and-done event. It’s an ongoing process that needs to be repeated and updated regularly, especially in an ever-changing global economy.