When Everyone Wins - About Competitive Pay

ayshakhatunasha

Successful relationships between employees and employers are built on trust. The level of trust and loyalty of an employee towards an employer is formed, among other things, by the factor of adequate and competitive remuneration of his/her work. The policy of forming remuneration affects job satisfaction, productivity and quality of work.

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Employees strive to work for a company that:

offers a competitive salary;
explains the formation of benefits and bonuses;
applies specific indicators to evaluate employee performance;
offers additional options to increase earnings;
fulfills obligations in good faith.
Employees are loyal to the company, participate in business development, increase profitability and improve competitiveness. The employer attracts and retains valuable personnel, creates a strong team of professionals and forms a solid reputation of the HR brand.

Market conditions for competitive wages
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A company's competitive wage policy is determined by three market conditions:

the degree of availability of qualified employees in the target labor market;
the activity of other employers competing in the same target market;
the reputation of the company's HR brand in the recruitment market.
The company forms a strategy for competition in the labor market from such elements as salary, compensation and benefits, working conditions, as well as payment levels for each element.

The choice of an "accent" element is a virtual phone number service strategic business decision to attract the necessary employees. In an optimal ratio, these components form a payroll management system that helps achieve the company's strategic goals.

Competitive position of the company
Developing a competitive recruitment policy requires an analysis of the market segment in which the company operates and where it prefers to prioritize searching for employees with relevant experience, and an assessment of its own competitive position.

Competitive position is the current indicator of the employer's salary level compared to employers in the labor market. To determine the "location", the salary competitiveness ratio (SCR) is calculated, when salaries for a specific company are compared with salaries of competitors or the average market rate for the industry:

● SCR (by competitor) = salary offered by an individual company ፥ salary offered by a competitor;

● SCR (industry) = the salary offered by an individual company ፥ the average market rate (salary) in the industry.

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Companies with competitive pay have an SCR of 1.0 or 1.1, meaning that the company's salary offers are equal to or higher than those of its competitors.

Example: an employee earns 3,000 BYN with a market median salary for the position of 3,300 BYN. In this case, the SCR is 0.9 and means that the employee's salary is 90% of the market salary, which will encourage the employee to take a job with a competitor with a salary level that is perceived as fair. To retain the employee, the company will offer a salary increase to the median salary on the market (SCR ≥ 1). If the company does not want to pay 100% of the market level for this job because the employee has not fully mastered the work processes, then increasing the salary to an SCR of 0.95 will retain the employee and insure the company against large expenses on hiring a new one. If there is a recognizable HR brand, an SCR of 0.9 is possible, preferably not lower. In this case, brand recognition, corporate culture and working conditions "compensate" for the missing SCR readings.



The company determines the salary review policy based on business objectives. A common practice for salary analysis is once every 6 months or 1 year. They use a "leading" approach to salary calibration, when the company is ahead of the market in salaries at the beginning of the year and lags behind at the end of the year, or a "lagging" approach, when the salary lags at the beginning of the year and leads at the end.