Though there are non-financial factors that can sway candidates to accept job offers or reject them, like company culture and work-life balance, it's hard to overlook the fact that money is a major motivator, as well. In a recent CareerBuilder survey, 29% of candidates declined job offers because the compensation on the table wasn't satisfactory. Meanwhile, in a survey by Express Employment Professionals, 61% of candidates said they went with competing offers because the salary was higher.
Not only can insufficient compensation serve as a major roadblock in the hiring process, but it also can prompt your existing workers to jump ship. And that's why your company needs to put some serious thought into developing a compensation package that not only makes financial sense for the business but helps it achieve its various goals.
Employee compensation: You can't just wing it
Many companies determine salaries on a case-by-case basis without looking at the big picture. But if you don't take the time to devise a well-thought-out compensation strategy, you'll run a number of risks that could hurt your business.
First, an absent compensation strategy might create issues in retaining your current staff. If workers come to realize that pay doesn't seem to be equitable across departments, or worse yet, within departments, they'll use that as a (valid) reason to seek employment elsewhere. The same holds true if the salaries you're paying are well below the average for your industry and local area.
Lacking a compensation strategy might also hurt your efforts to attract talent. Again, if your offers fall short compared to what the competition is offering, getting new hires to come on board is going to be a hard sell. And that's why it pays to focus your efforts on developing a strategy that focuses on retention and hiring, all the while maximizing your company's resources.
Establishing your compensation strategy
Developing a compensation strategy takes time, but it's a worthwhile investment. To get started, set some goals. Is your aim to outbid the competition? Pay just enough to stay competitive? Answering these questions will help inform the decisions you make as you establish your company guidelines.
Next, do your research to see how your current compensation shakes out. Is it in line with the industry standard? Is it such that present and future employees will be motivated to work for you? Figure out where you stand because that, too, will clearly play into your strategy.
Of course, just as it's important to figure out how you'll go about establishing salaries, you also must decide how you'll go about increasing salaries over time. Will your raises be market-based? Performance-based? A combination of both? Having these guidelines in place will help you develop a more unbiased system that reflects well on you as an employer and gives workers less to question or gripe about.
Finally, compensation isn't just about salary, so take a look at the big picture. Are your benefits appealing? Do you offer a wide range of perks, from health insurance to paid time off to 401(k) matching? These days, workers want more than just a paycheck -- they want benefits that allow them to enjoy their lives and save money in other ways. So figure out how much you can afford to allocate to workplace benefits and choose the ones that are most likely to have the greatest impact.
All workers want to be compensated fairly or at least understand how their compensation is determined. Once you have your strategy in place, you'll be better positioned to do right by your current employees, all the while attracting the new talent you need to be successful.