How do the rates of pay you offer employees stack up with those paid by competing businesses? If you aren’t aware of what the going pay rates are, and the pay is low, it can hurt your business.
In addition, many businesses, especially small and midsize ones, may decide to offer somewhat low pay rates, feeling they want to achieve greater cash flow and profits before raising salaries. That’s not a good idea in the long run, either.
Losing Top Performers to Competitors
For most people, compensation is a large part of why they work! That’s not surprising, right? So even if your employees accepted the rates of pay your company offers initially, they may not remain satisfied with them.
If you have excellent performers, they may start looking for positions with higher pay than what your company offers. Employees are well able to figure out if comparable companies pay more, via job postings, sites like Glassdoor, and staffing agencies. In today’s economic climate, the market is the employee’s because the unemployment rate is so low.
Don’t rely on exit interviews to find out people are leaving you because of compensation issues. Many people aren’t comfortable stating that. It’s a good idea to do a comparative analysis of the companies in your line of business.
Are You Missing Out on Top Candidates?
The other potential problem with low financial compensation is it can lose you candidates. Companies develop reputations within the community and within networks of employees and former employees.
If your company becomes known for its low pay scales, then top candidates may decide not to even send you a resume. This can be particularly dangerous, because you won’t necessarily know it’s happening.
Top candidates can afford to be choosy. They may decide they don’t want to expend the time and energy of sending a resume and going for an interview with a company that isn’t likely to pay them their desired rate.
How to Ensure Competitive Pay Rates
How do you make sure your company’s pay rates are competitive? One way is to talk to owners and human resources people in comparable companies. But that does carry some risk, as you might be revealing more of your company’s internal processes than you’re comfortable with.
Staffing agencies can be very helpful in determining the competitive pay rates in sectors, comparable companies and your area. They can also give advice about any benefits structure, to help your compensation and benefits packages be competitive.