What is Competitive Salary?
When it comes to pay, the term "competitive" refers to pay that is comparable to or higher than the market value of a position. A competitive salary in human resources is equal to the average market rate for the position plus a percentage of that rate. This percentage may vary depending on the pay philosophy of the company. It also means that pay is competitive in comparison to what other companies might offer for a comparable position in the same industry and geographic area.
What are the 5 factors that determine competitive salary?
Because the market value of a job can fluctuate depending on factors like industry and location, it's important to remember that pay can vary and isn't always a fixed amount. Below is a breakdown of the factors that can influence compensation.
1. Job Title
When it comes to determining a competitive salary, the role itself will frequently have a market rate baseline. To determine compensation rates for your role, consult reputable industry resources such as the Bureau of Labor Statistics (BLS). Once you've determined the average market rate, use it as a guide to determine salary competitiveness. Remember that salary ranges can vary depending on the role, so when conducting your research, make sure you're referring to an accurate job title.
2. Level of Experience
Most jobs will pay you based on your level of experience or the experience required for the job. The experience level required and the associated salary range are frequently determined by whether the role is entry-level, mid-tier, or higher. Entry-level positions, for example, require no to little experience and are generally paid less than mid-tier positions, which may require several years of experience. Your education and practical skills all contribute to your experience level, and the demand for your skill set should be considered when determining a competitive salary for you.
The industry in which your desired job is located has the ability to influence the standard of competitive pay. In order to attract top talent, lucrative industries such as technology and finance may have more competitive rates than other industries.
If you have a desired career path but aren't set on a specific field, it's worth applying for the same position in multiple industries to see how compensation packages differ. If a high salary is your goal, research earnings by industry and apply to several companies within the highest paying industry to find the most competitive pay for you.
4. Geographical location
The average market rate of a position is also affected by its location. Places with a higher cost of living and a higher minimum wage usually compensate more to account for these factors. It's best to narrow your search to a specific geographic area for the most up-to-date salary and wage data. The BLS compiles wage data by region, state, and many metropolitan areas.
5. Availability of Career opportunities
Salary, like market prices, varies according to supply and demand. When a job is in high demand but in short supply, pay is more likely to be competitive. On the other hand, if a position is in high demand but there are many qualified candidates, the market rate of the position will likely fall. Check out this list of the fastest-growing jobs for in-demand positions if you're looking for a hiring pool that works in your favour.
What is in a Competitive Compensation Package?
1. Paid Leave
The amount of paid leave provided is an important aspect of any compensation package. Time away from work is essential for your health and wellness, and it is also required if something changes in your personal life or if you become ill. Vacations are also an excellent way to establish boundaries at work in order to avoid burnout. You can maintain your performance and work toward your personal and professional goals if you can balance your life and work.
2. Health Care coverage
Another standard component of a compensation package is health insurance, which is generally provided to varying degrees depending on whether your position is full-time or part-time. Medical, dental, and vision insurance are among the most desired employee benefits, so it's no surprise that better health coverage is frequently a prized aspect of competitive pay.
3. Retirement Options
Many businesses include retirement plans as part of their compensation packages. You can start saving for retirement by contributing a portion of your paycheck to a 401(k), 403(b), or Roth IRA, depending on your employer and your options. Because your employer will often match a percentage of your contributions, it's a good idea to take advantage of this by contributing the maximum amount allowed each year as long as you can afford it.
4. Other Advantages
While salary, PTO, health insurance, and retirement benefits are common components of a standard compensation package, they are not the only options available to you. When evaluating a job offer, do not be afraid to inquire about additional compensation benefits such as bonuses, stock options, and profit-sharing. Here are a few questions to ask during your next salary negotiation:
- Sign-up bonus
- Bonus for performance
- Bonus for Relocation
- Options on stock
- Profit-sharing scheme
- Budget supplement (e.g., for wellness or career development)