How To Know If You’re Offering Competitive Pay
Is your pay competitive? Most companies answer this reflexively, “Yes.” But how do you know what’s competitive when you haven’t looked at your local market data in years?
You don’t know. And that’s costing your business.
Without accurate market data, it’s impossible to know if your pay is competitive. Especially in fields like HVAC where there’s many competitors concentrated in one area. By the time you’ve realized your pay is no longer competitive, you’ve lost employees to competitors, dried up your candidate pool, and created employee dissatisfaction.
What Is Competitive Pay?
Competitive pay is a salary or wage that aligns with the current market rate for a specific role, experience level, and geographic location. As an employer of choice your pay should reflect:
- Local labor demand
- Cost of living in your area
- Experience and certifications
- What your competitors are actually offering
Far too often we see companies assuming their pay is competitive when in reality, they’re using outdated pay information. Or employers can have a reactive approach – offering pay raises when employees ask for one. We recommend conducting a salary survey or competitive pay analysis at least once a year for your specific local area.
5 Signs Your Wages Aren’t Competitive
1. You’re struggling to attract QUALIFIED candidates
If your job ads don’t bring in enough strong applicants, your pay rate may be to blame. Paying below market rate, especially for more experienced roles, leads to poor applicant flow. You can’t get senior level work with junior level pay. Additionally, any qualified candidates that come your way may ask for higher pay than your current employees in similar positions, causing pay compression.
2. Candidates are declining your offers
When you come across a top candidate, chances are you’re not the only company they’re interviewing for. Top candidates often receive multiple offers, and compensation plays a major role in their final decision.
3. Your time-to-hire is increasing
When it takes longer than average to fill your open role, that could be a sign that your compensation isn’t aligned with market expectations. Don’t forget to take a look at your local competitors. What are they offering for compensation and benefits?
4. Your current employees are leaving you for higher pay
Employees leave for a multitude of reasons, but when you conduct an exit interview with a 3rd party, you may find the common theme is lack of pay.
5. You haven’t adjusted wages in years
Pay ranges typically shift every year and even more so when you’re in a high demand labor market like the skilled trades. Using pay ranges that are 1-2 years old+ leaves you far behind your competitors.
How To Build Competitive Pay Bands
Building competitive pay starts with research. Look at your local market. Is there a shortage or surplus for the role you’re hiring for? Shortages are going to increase your competitive pay rates. To maintain your employer of choice status, you need to fall close within those ranges. Don’t have the time to do salary research? Work with our team of HR experts to conduct an in-depth salary survey for your area.
Get Clarity on Your Compensation Strategy
Businesses need to create a deliberate compensation strategy.
The options for setting pay in relation to the market include:
- Matching the market – setting pay levels relative to existing marketplace
- Leading the market – setting pay levels higher than the marketplace
- Lagging the market – setting pay levels below the existing marketplace
Companies that match the market are able to remain competitive and attract top-tier talent. Employers that are willing to set pay above the marketplace are at an advantage where they receive a higher pool of applicants and are able to decrease turnover. However, if you’re setting pay levels lower than the marketplace – you’re lagging the market. This means that you have the most difficulty in attracting qualified applicants and are susceptible to higher turnover and lower employee morale.
Competitive pay isn’t a one-time decision you make. Your pay ranges should shift with the market. When compensation falls out of alignment, the impacts show up quickly in your hiring, employee retention, and your ability to grow as a company.
Most businesses don’t struggle because they’re unwilling to pay competitively. They struggle because they don’t have a clear, accurate picture of what “competitive pay” is in their market.
That’s where better data changes everything.
Our salary surveys give you a real-time, market-based view of what you should be paying for the roles you’re hiring. No more assumptions. No more outdated averages. Find out how your pay stacks up against your competition.