One of the most common mistakes for employers is overlooking the importance of providing a competitive salary to their employees. This is because they see it as an expense when, supposedly, it is an investment.
For example, Silicon Valley Associates Recruitment offers you some significant reasons why paying your employees a competitive salary is substantial.
First of all, what does it mean to pay a competitive salary? This means the salary incentives you pay to your employees are comparable to the money market. For instance, for a similar job, a competitive salary is equal to or above the standard offered by companies in the same industry or geographical area. A common HR practice offers within 10% above or below the market average for a job as a basis for competitive pay.
For workers, there’s a clear advantage to leaving, since they gain, on average a 10 to 20 percent raise in base salary with each new role, but 73% of the time they need to leave their current employer to capture that increased employee salary. Such high employee turnover is acutely felt on the employer side as well since the cost of voluntary turnover can become exorbitant depending on the seniority of the role that needs to be filled.
Make Sure Base Salary is Competitive
On the bottom line, thanks to a candidate-friendly job market and the advent of data transparency tools like management fees, workers know the value of the work more than ever before. So if your employees’ compensation levels are not competitive for the industry and marketplace you’re in, don’t expect them to stick around for long.
Also, ensure that you offer meaningful promotions – in both responsibilities and salaries. Know that with higher compensation comes higher expectations: Paying employees top-notch salaries means that your standards can be equally high. Rest assured, as well, that workers who are paid well will also expect more from themselves. Be sure your salary is adjusted accordingly, employees who work on the front lines for you in more expensive cities shouldn’t have to shoulder the additional evaluations for you.
Go Beyond Base Salary
To retain top talent, the investment plan goes into thinking beyond base salary, and variable pay benefits are a great place to start. Think of salary as employee compensation for regularly performing the tasks required for them, day in and day out. On the other side of the coin are variable pay benefits and investment options – financial incentives that serve as hedge funds to motivate your workers to exceed established goals and capture additional mutual funds.
Many organizations have found variable pay benefits to be a proven powerful tool for driving long-term investments as well as short-term, and retention. These include:
- End-of-year or holiday bonuses.
- Sales commissions.
- Stock Market interest rates.
- referral bonuses in real estate.
- Ash spiffs diversification.
- Profit sharing.
No matter the benefits you choose, the most important thing to remember is to keep the incentives simple. Each of your employees should understand them and know exactly how to achieve them, so clearly communicate every goal, the amount of productivity required, and the results they need to deliver.
Why paying a competitive Salary is important
One of the common mistakes for employers is overlooking the importance of providing competitive salaries to their employees. This is because they as a financial institution see it as an expense and paying them less may seem at first as a lower risk for the agency, but in the long run financial advisors will surely advise you that it is part of any investment product in any enterprise.
First of all, what does it mean to pay a “competitive” salary? This means the salary you pay for your employees is comparable to the market. For instance, corporate finance will tell you a competitive salary is equal to or above the standard offered by companies in the same industry or geographical area. A common HR practice offers within 10% above or below the market average for a job as a basis for competitive pay.
- Paying Less tends to be more Costly
Employers need to consider that one of the primary reasons for employee turnover is salary: Employees who feel they are not well compensated tend to look for other high-paid elsewhere, underwriting private equity and well-being above everything else. This will cause your employees to quit and move on and will cost your agency a huge amount of money because it is costly to recruit and train new employees for replacement. Therefore, the cost of hiring a new employee exceeds the amount of money you think you’ve saved by offering lower salaries.
- Low Pay could Demotivate employees
Salary is a primary extrinsic motivator for employees. And we cannot deny that we work because we wanted to be paid fairly. Workers that feel they’re being paid fairly are more likely to stay motivated and go motivated and go the extra mile to help your company achieve its goals. So when employees feel they are paid less than others who have a similar job to theirs, they can get demotivated and less invested in their work.
What is even worse about this is that demotivating employees could adversely impact their productivity and morale. They might devote little to their work and spend their time looking for another job. People who are willing to work for low salaries might not see it worth their time to bring value or optimal productivity to the agency but rather as a stepping stone to a better job. This could lead to an employee decline and leave you with a constant flow of new employees who are always training. You get what you pay for in a nutshell.
- High Pay Improves Motivation
On the other side, employees are heavily motivated by higher pay. This would make them feel valued and appreciated, which enhances employee treatment of clients with passion. In turn, employers can demand a higher quality output from them.
- Top talents are Attracted to High Salaries
Talent employees know what they’re worth. When your company is not offering a competitive salary, then they won’t likely buy into the job offer. This could hinder companies from scouting talented employees to their desire. And there are many top candidates in the market. Institutional investors should value your salary proposal, they will likely end up with what you ask for. This could become a threat to you because their capabilities can enhance the competitor’s performance over yours.
- Higher Pay improves the Company’s Stakeholders
So when employers invest in their employees, they will have more economic opportunities to improve their lifestyle. Employees who have more money will also spend more money. And this would boost not only their well-being but also the community where your business is operating. Your business can benefit from it. Corporate bonds will not last if this matter is not attended to, what goes around, comes around. This cycle applies to any agency.
What should you do…
Take advantage of paying a competitive salary! Looking over its benefits and disadvantages, we can conclude that how we pay our employees play a crucial factor in the company’s performance. Paying a competitive salary also benefits hiring managers from getting rid of employee turnover and constant recruitment process to new employees training.
Employers must not take their employees as a financial burden but rather as an investment for growth, improvement, and success. This includes training and team-building activities that enhance employee relationships, acquire new skills and knowledge, and establish a positive organizational culture.
How to Determine a Competitive Pay…
Employees that make lower wages, especially those at minimum wage, can struggle to make ends meet. This can adversely affect their performance and living conditions.
Industry trends and Market
- You have to take into account the trends and market performance of your company. Find out what your competitors offer for a similar position, taking into account your company’s industry and size.
Benchmark salaries and Benefits
- Research salary guides and employee feedback aligned to your target or chosen position to know the range and what to expect in your salary.
Location and cost of living
- Consider where your business is located. Salaries vary from state to state and even city to city, so research nearby pay rates and the cost of living in your area.
Supply and Demand
- Employers who Loof for Specific or highly qualified skills and qualifications are more likely to offer high salaries to attract candidates.
Benefits, Incentives, and Bonuses
- While benchmarking and researching a salary guide, you can also research the required and potential benefits and incentives you can get from the company.
Quality of Work-Life Rewards
In addition to base pay and variable rewards, you can strengthen your compensation arsenal by providing “quality of work life” rewards. Like variable pay benefits, these are incentives that reward workers for going above and beyond, but instead of cash are focused more on improving life and skill development. These can include:
- Educational assistance, such as tuition reimbursement or paid professional development and certification programs.
- An annual retreat for top performers, with workshops and other events that inspire engaging creative thinking.
- Increased opportunities for telecommuting or schedule flexibility.
- Equipment upgrades, such as laptops for performing remote work or tablets to use during sales presentations.
The most important consideration here is to develop a reward program that is applied fairly and consistently across the entire organization, so everyone can help the benefits no matter their type of investment.
Know that Salary alone may not be enough
Even when you’re checking all the boxes for salary and additional compensation, it may not be enough to halt employee turnover – retirement plans continue to prize remote or flexible workers highly as salary. Recent data from HR software maker ICIMS found that half of the companies had removed or loosened location requirements for new hires, meaning companies will increasingly have to compete for talent with companies that let workers work from wherever they feel most comfortable.
If remote or Hybrid work is an option for your organization, it may be time to consider adding that to your list of benefits.
Partner with a staffing firm
Developing a strong competitive employee compensation program is not an easy task, with a higher risk of stakeholders losing their interest in the place. That’s where working with a staffing firm with deep expertise in compensation and its impact on employee retention can place you on the fast track to stretching your organization.
Retaining Top Talent
While the job market in some industries and regions favors employers, candidates with in-demand skills likely won’t have to wait long to find a new opportunity. Many companies never stopped recruiting talent during the pandemic, and many others have picked up the pace of hiring in recent months.
If you sense your business is at risk of losing top talent, you need to move fast to shore up your employee retention strategies. Here are 10 areas where deliberate action can help boost employees’ job satisfaction and increase your ability to hold onto valued workers:
- Onboarding and orientation
every new hire should be set up for success from the start. Your onboarding process should teach new employees not only about the job but also about the company culture and how they can contribute to and thrive in it. Don’t skimp on this critical first step. The training and support you provide from day one, whether in person or virtually, can set the tone for the employee’s entire tenure at your firm.
- Mentorship Programs
Pairing a new employee with a mentor is a great component to add to your extended onboarding process, especially in a remote work environment. Mentors can welcome newcomers into the company, offer guidance and be a sounding board. And it’s a win-win: New team members learn the ropes from experienced employees, and, in return, they offer a fresh viewpoint to their mentors.
- Employee compensation
Companies need to pay their employees competitive compensation, which means employers need to evaluate and adjust salaries regularly. Even if your business can’t increase pay right now, consider whether you could provide other forms of compensation, such as bonuses. Don’t forget about improving health care benefits and retirement plans, which can help raise employee satisfaction, too.
Perks can make your work stand out to potential new hires and re-engage current staff while boosting employee morale. According to research for our salary guide, flexible schedules and remote work options are the perks many professionals value most. In addition, about a third of the professionals we surveyed said paid parental leave is a big plus.
- Wellness Offerings
Keeping employees fit – mentally, physically, and financially – it’s just good business. Many leading employers expanded and improved their wellness offerings during the pandemic to help employees feel supported and prioritize their well-being. Stress management programs, retirement planning services, and reimbursement for fitness classes are just some examples of what your business might consider providing to employees.
The shift to hybrid and remote work has undercovered the importance of good workplace communication. Your direct reports, whether they work on-site or remotely should feel they come to you with ideas, questions, and concerns at any time. And as a leader, you need to make sure you’re doing your part to help promote timely, constructive, and positive communication across the entire team. Make sure you proactively connect with each team member regularly, too, to get a sense of their workload and job satisfaction.
- Continuous feedback on performance
Many employers are abandoning the annual performance review in favor of more frequent meetings with team members. In these one-on-one meetings, talk with your employees about their short and long-term professional goals and help them visualize their future with the company. While you should never make promises you can’t keep, talk through potential career advancement scenarios together and lay out a realistic plan for reaching those goals.
- Training and development
As part of providing continuous feedback on performance, you can help employees identify areas for professional growth, such as the need to learn new skills. Upskilling your employees is especially important today as technology continues to change how we work. When people upskill, they gain new abilities and competencies as business requirements evolve.
Make it a priority to invest in your workers’ professional development. Give them time to attend virtual conferences, provide tuition reimbursement or pay for continuing education. Also, don’t forget about succession planning, which can be a highly effective method for advancing professional development and building leadership skills.
- Recognition and rewards systems
every person wants to feel appreciated for the work they do. And in today’s “ anywhere workforce, an employer’s gratitude can make an especially big impact. So be sure to thank your direct report who goes the extra mile and explain how their hard work helps the organization. Some companies set up formal rewards systems to incentivize great ideas and innovation, but you can institute compelling recognition programs even if you have a small team or a limited budget.
- Work-life balance
What message is your time management sending to employees? Do you expect staff to be available around the clock? A healthy work-life balance is essential to job satisfaction. People need to know their managers understand that have lives outside of work and recognize that painting balance can be even more challenging when working from home. Encourage employees to set boundaries and take their vacation time. And if ate nights are necessary to wrap up a project, consider giving them extra time off to compensate.
Costs of employee turnover
Frequent voluntary turnover rates hurt your organization in more than one way.
- Turns down morale
One of the first changes you’ll notice is a decrease in employee morale. As more employees leave, the ones remaining may have lost a valuable work friend, which matters more than you might think.
If an employee leaves, the culture and the commitment your remaining employees have to the organization and their role can be severely affected.
- Decreases productivity
Losing employees also leads to decreased productivity, quite simply because you have fewer team members to get work done. As the remaining employees get overwhelmed with more work to help make up the difference, their stress levels rise, making them far less likely to perform at their best.
This kind of hit on your employees’ productivity is also a hit to your agency financially.
- Financial cost
Perhaps the biggest concern employee turnover presents, from recruiting and training new employees to replace the ones you’ve lost. While the exact cost of turnover rates varies, there’s no question it’s something employers need to manage.
The average cost of losing an employee can cost thousands of dollars.
Some studies predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a manager making $60.000 a year, that’s $30.000 to $45.000 in recruiting and training expenses. However, turnover seems to vary by wage and role of employee.
For example, some reports the average cost to replace an employee:
- $1,500 for hourly employees
- 100% to 150% of an employee’s salary for technical positions
- Up to 213% of an employee’s salary for C-suite positions.
Recruitment Costs: The direct costs of hiring a new employee including advertising, interviewing, screening, and hiring.
Onboarding costs: The cost of onboarding a new person, including training and management time.
Lost productivity: It may take a new employee one to two years to reach the productivity of an existing person, resulting indirect costs to your organization.
Customer service and errors: New employees take longer to complete their work and are often less adept at solving problems.
Training costs: Over two to three years, a business likely invests 10% to 20% of an employee’s salary or more in training.
Lost institutional knowledge: When highly skilled or longtime employees leave, your organization loses some institutional knowledge, or the combined skill set and experience of your business.
Cultural Impact: Whenever someone leaves, others take time to ask why.
One of the reasons the real cost of employee turnover is a mystery is that most organizations don’t have systems in place to track exit costs, including recruiting, interviewing, hiring, orientation, and training, lost productivity, potential customer dissatisfaction, reduced or lost business, administrative costs, and lost expertise. Calculating this amongst all employees for a total annual cost takes collaboration among departments’ tools to measure these costs and reporting mechanisms.
How much money an agency has to invest in new Talent?
- The cost of hiring an employee goes far beyond just paying for their salary to encompass, recruiting, training benefits, and more.
- Integrating a new employee into the organization can also require time and expenditures.
- It can take up to six months or more for a company to break even on its investment in a new hire.
- Benefits should account for an employee’s investment requirements, not just that employee’s salary.
When an employee leaves your agency, it can be a big blow to your organization’s morale, productivity, and budget. That’s why implementing strong retention strategies from the beginning is so crucial, including offering quality benefits to take care of your employees.
Remember salaries should be your top investment. Keep your employees happy and everything will go down smoothly.