It’s a full-on war for talent out there. Top candidates are receiving multiple offers and in a world of choices, money talks! But, if you pay top dollar to attract new talent, how will that affect your loyal employees who are limited by 2% annual merit increases. Will they have to leave in order to be paid what they’re worth?
The ability to attract top talent can make, or break, an organization. So, how can you ensure you’re bringing in the best and the brightest without breaking the bank, and upsetting your internal salary parity?
Salary parity (ensuring all employees are paid fairly according to their job duties, performance and tenure) greatly effects corporate culture, individual job performance and the ability to retain staff. If employees feel they’re being underpaid or worse, purposefully undervalued so others can receive a more, the chance of employee attrition increases drastically. According to a jobseeker survey, 65% of jobseekers left their previous positions because they felt undervalued by their employer.
Internal salary parity puts employers in a difficult position. How can you bring in top tier talent without upsetting the internal balance and remaining loyal to current employees? As an employer, market conditions and business needs sometimes necessitate raising salaries to attract new talent, especially for key and hard-to-fill positions. Business can suffer if these positions remain unfilled for long periods of time, particularly if competition for talent is fierce and the competition is paying more than you.
So, what is the solution? How can you hire the rock star while maintaining salary parity?
Create a culture you can’t say no to
Fill your corporate resume with a list of intangibles new employees can’t say no to and current employees won’t find elsewhere. Think flex time, telecommuting, reduced summer hours, PTO for employees to volunteer, a relaxed dress code, corporate sponsored events and wellness initiatives. Convenience matters too, consider things like organizing a dry cleaning pickup and drop off or a car care company to provide washes and oil changes in parking lot. The company doesn’t have to pay for these perks, instead you’re giving employees back the time they would have spent running these errands after work. And, of course, don’t forget about buying lunch. Providing lunch for employees on a regular basis instills a sense of comradery and team amongst employees.
Improving corporate culture is a great solution because it benefits current and future employees. Additionally, lots of improvements can be made without any out of pocket investment.
Another solution to maintaining salary parity is to increase internal employees’ salaries regularly so they keep pace with fair-market conditions. When considering employee raises, first you must determine what type of raise policy you’re going to institute. The most common include:
|Across the Board||Everyone, companywide, receives a raise in the exact same dollar amount||Everyone gets a raise||Doesn’t reward performance
|Wage x Percentage||Everyone, companywide, receives a raise based on a percentage of their salary||Employees value the stability of knowing they’ll receive a raise every year||Your salary ranges can quickly become out of sync with the market average, doesn’t reward performance
|Performance based||Top performers are rewarded more then those who are under performing||Keeps your best and brightest happy||Pits employees against each other
Long-term financial incentives
The downside to instituting a company-wide raise policy for existing employees is that it directly impacts operating margins and profitability. And, it is very difficult to reverse those raises in the dreaded down year. What happens if you’re unable to give raises one year or worse, you have to reduce wage expenses? How will that effect employee morale and attrition?
Incentive plans implemented at key milestones can help attract new talent and retain current staff. Common examples include a 401K, stock options, and incremental increases in vacation time and cash bonuses.
Typically, incentive plans are implemented between 3-5 years, with the employee receiving nothing if they leave the company prior to the date their incentives vest. Long-term incentives can be extremely effective in promoting loyalty and longevity in executive level positions, however they’re rarely used to their full extent with the majority of the workforce. Most employees are offered a 401k and incremental increases in vacation time with such frequency these benefits are seen as standard, thereby devaluing the benefits themselves.
So, what is the correct answer? How DO you ensure you’re bringing in the best and the brightest without breaking the bank and upsetting your internal salary parity?
To find the solution best suited for your unique situation, consider the examples above. Outline a plan that encompasses the elements you think would work best for your organization. There is no one-size-fits-all solution. And then, ask yourself these three questions.
- Can I explain to my employees how my solution is fair?
- Is my solution economical?
- Does my solution lead to building a stronger company?
If you can answer yes to all three questions, you’ve solved the salary parity problem.