Unemployment rates are low which means hiring (and retaining) talent must be a priority.
Hiring managers may claim they want to attract the best candidates to their brand, yet they are stifled in their ability to do so by what we call ‘internal equity’. This problem typically occurs when the hiring manager fails to hire an outstanding candidate because they can’t meet their salary expectations of $120k as the equivalent manager in the next department is only earning $100k. The result is that the employer makes an unsatisfactory offer to the candidate their business desperately needs. The candidate turns the offer down and is swiftly employed by a competitor willing to meet their salary expectations.
An additional side effect is your loss of credibility and subsequent damage to your employer brand, which will impact your ability to attract talent in the future.
Asking for a higher salary
To succeed in talent acquisition, employers must overlook issues of internal equity and pull out all the stops to hire top performers. When it comes to sourcing outstanding talent, we recommend that you evaluate your compensation based on the external market rate, rather than current levels within your business.
Our salary guides are a great resource for this.
Another point to ponder is this: the employees you are currently paying below the market rate will be fully aware of their value in the jobs market. Chances are they are exploring job opportunities outside of your organization right now.
The race for talent will be won by employers who take the market rate seriously and recognize that they are competing with other businesses, not with their existing team. The risk is that your competition will be more forward-thinking than your organization. As a consequence, you will lose any brand advantage you may have in the market – as well as the top candidates.
What is the market rate?
The market rate in recruitment is what your competition deems a fair salary for your target candidate. Of course, the candidate’s final decision to accept your job offer isn’t solely based on salary. Today’s job seekers demand career development opportunities, positive leadership and recognition for their achievements too but as an employer in today’s market, that must be a given. The fact is if you fail to offer the market rate, you will struggle to hire.
If you’re currently offering compensation below the market rate, you have probably been underpaying your loyal employees for several years. Now we’re out of the recession and experiencing a buoyant employment market, the old rules don’t apply.
If you want to resolve the problems with your hiring budget, pay your employees what they are worth and for new hires, be prepared to pay the market rate. The longer the issue is unresolved, the higher your turnover levels.
Thinking of asking for a raise yourself?
Review our 7 steps to prepare yourself to ask your manager for a raise.
Hear from Angela Davis, Gretchen Brown, and Chris Farrell on to make more and save more in the new year: