Organizations across all sectors have access to a limited pool of top talent, so the temptation can always be there to pay that bit extra to secure the best workers. That said, appreciating the need to maintain a healthy bank balance should always be top of the priority list, so how can companies know if they’re paying more than they should to staff?
How do you accurately assess pay to skills?
A key element of understanding if you are paying over the odds for talent is to carry out some simple research. Organizations have a number of options open to them in this regard, including:
Research your wider industry
Check job listings and ask around recruiters to assess the amount of pay that is suitable for individuals in specific roles and with required levels of experience. In many cases, a benchmark for pay can be gained by actively recruiting and asking candidates themselves what they expect to earn.
Compare salaries within your business
Existing employees can be another good benchmark for setting salary expectations. When considering how much is an appropriate level of pay, examine the skills and experience of current staff and assess where salary expectations should lie.
Calculate cost to replace
When looking at costs involved in replacing a staff member, companies should not simply consider the cost to recruit new talent, but also how much it would cost to train an individual from existing staff to fill a specific role.
When determining what is an appropriate salary for any individual, it's also important to factor in their desirability to other businesses. If a person has the skills, attitude and experience that will make them an attractive prospect for your competitors, then it can sometimes be justified to pay them more.
How much is too much?
It's important to understand that against a backdrop of growing skills shortages in some sectors, the need to pay more for top talent is almost inevitable for many businesses. Indeed, research from the Korn Ferry Group predicts a global talent shortage of 85.2 million by 2030.
As a result, businesses will need to factor in a potential rise in costs for some skills in the years ahead. Most notably, this is likely to be in the areas of finance, technology, telecommunications, media and manufacturing.
What can companies do about it?
In the end, businesses exist to make money, so taking steps to reduce the impact of salaries on revenue is important. At the same time, organizations must ensure they hold on to and attract the best employees to deliver their products and services.
A way to overcome the hurdle of high salaries is to invest in other benefits for employees. This could be something as simple as a free gym membership or the ability to work remotely, each of these perks will hold a certain value to staff.
Indeed, research published by JobVite reveals just 9.8% of job seekers don’t factor in the range of employee benefits offered by a prospective employer when considering if a company is attractive to them.
Understandably, addressing an imbalance in pay can be difficult for any business, as employees will be loath to take a cut in salary, even if they appreciate they are being giving more than their fair share.
As a result, businesses should be take every step possible to ensure they aren't paying over the odds for individuals from the outset. This means doing their homework and setting a reasonable pay structure that's in line with their industry standard.