Creating the right total complementation package depends on your organization’s values, goals, and strategy for growth. It’s important that the compensation and benefits offered supports the culture and brand you’re trying to build. Once you know the types of employees you’re looking to attract and retain, you should build your total compensation plan with them in mind and budget accordingly.
Determining the “right” compensation can be tricky. Not only is money a touchy subject, but so many factors play into determining compensation rates that are both fair and competitive.
Here are the factors that influence compensation rates the most:
Years of experience and education level It probably goes without saying, but the more experience and education a candidate has, the higher their expected compensation. So, if you’re hoping to attract job seekers with master’s degrees or more than 5 years’ experience, you need to be ready and willing to compensate accordingly.
Industry Workers with similar or even the same job title can expect vastly different wages depending on what industry they’re in. There are many reasons for this discrepancy; in some cases, their job function may be critical to a particular industry, or it may simply be a matter of one industry being considerably larger than the others.
Location Cost of living, a major factor to consider when determining compensation, is largely dependent on location and, more specifically, the cost of housing. This is at least partially why salaries in large urban areas are generally higher than salaries for similar positions in more rural locations.
In-demand skill sets When it comes to determining compensation, key skills may be an even more reliable metric to compare against than job title. After all, different companies may have very different definitions of the same job title. On top of that, many skill sets can apply to a wide variety of roles – all of which are effectively competing for the same talent. That’s why it’s important for employers to consider the value of key skills when determining compensation.
Supply and demand It’s crucial to be aware of the availability of relevant talent in the geographic region where you’re recruiting. If you’re recruiting in an area where the demand for certain skill sets and experience outweighs the supply, you should expect to pay more in order to attract talent.