Thanks to the availability of information online, the average job applicant is more informed than ever before. Because of this, it’s important for hiring managers to set fair salary ranges that are in line with their competition. Without careful consideration, companies can risk either overpaying or underpaying employees, and risk losing their talent to more competitive offers.
Determining a fair market value of a salary package requires careful consideration of a few factors: location, company size, industry, business type and job requirements. In this context, a “fair” offer is going to be comparable, and hopefully preferable, to what other companies are offering for similar roles.
The first step in this process is ensuring that your job description is accurate and comprehensive. Without this, it’ll be that much harder to research and compare your role to surrounding companies — and equally hard for the applicant to determine if the value is fair.
When writing or reviewing your job description, be sure to clearly outline every duty and requirement. Consider typical projects this role will work on and the education + experience level needed to accomplish these projects. Finally, determine how critical this role is to your company’s operations; the more important the role is, the more you can justify spending on salary. Many hiring managers will assign scores to each of these values, to better compare different roles.
After you have a good idea of the job role and hiring priority, the next step is to begin researching what other companies are offering for similar positions by browsing online job postings or by contacting their human resources department directly.
When in doubt, you can often find ample resources online that will provide good estimates of fair rates. In fact, many hiring and recruitment platforms offer salary estimates as a feature.
Remember that location and company size is important. If you are a small company located in a rural area, you won’t be able to compare your wages against multinational corporations in larger cities.
Next, take the results gathered from your research in step 2 and compare the salary ranges against the most recent national averages. Fortunately, the Bureau of Labor Statistics has a number of databases that will allow you to search for the national average salaries for specific positions.
This average salary data will function as a benchmark figure to help keep your salary ranges reasonable, but ultimately local competition will matter more. Remember to refine your search to focus on location, company size, education level and other factors that may adjust .
Once you have all of your research and have compared it to national averages, it’s time to set a fair salary range for your open position. This is just an initial salary range and may be adjusted by factors in step 5.
For example, if you’ve learned that the national average salary for Front End Designers is around $70,000, but other companies in your area tend to pay anywhere between $75,000 – $85,000, then that signals that you may need to pay above the national average to remain competitive. However, you should always look at the lower and higher ends of these ranges. Are these companies comparable to yours? If not, then continue to research until you find companies that are similar in scale, location and scope.
Finally, it’s important to consider how you can incorporate non-monetary benefits into your salary package. This will allow you to adjust salary offerings, but make up for them in ways that are still valuable to potential new hires.
Some benefits, like health insurance, vacation time and retirement savings, have explicit monetary values associated with them which will allow you to easily adjust the pricing of salary packages.
Other benefits, like company culture, flexible scheduling and professional development opportunities, may not have explicit monetary values associated with them, but that doesn’t make them worthless. Oftentimes, these non-monetary benefits are just as sought out as more typical incentives. You may be able to attract employees with a lower salary offer than competitors if you’re also offering a number of attractive non-monetary incentives.
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