If you don't think salary level is still important when it comes to attracting and retaining top talent, you're kidding yourself. If you don’t offer competitive pay, you could be swiftly putting yourself out of business.
Lately, career development has been coming up a lot as an important strategy to attract and retain new graduates, but salary remains (and will likely always remain) higher on the chain of importance. In a study conducted by LinkedIn, 61% of recent college graduates said compensation was their highest priority when considering a new position.
What is a competitive salary?
In essence, a competitive salary is equal to (or more than) the industry average for the same kind of position in the same location. Generally, a competitive salary indicates that a company is at least somewhat willing to negotiate when it comes to pay. That ability to negotiate is something that appeals to graduates, who often feel overeducated for the jobs they apply for. A competitive salary is also often referred to as “market rate” or “industry standard.”
It’s important to note — for graduates and employers alike — that competitive salary operates under supply and demand. The fewer people that are qualified for a position, the higher the industry standard will be. Keeping in mind what competitive salary is, let’s look a little closer at why it matters so much to graduates.
What makes it appealing?
Every company must walk the line between paying their employees a salary that will make them the happiest and make sure the business stays profitable. If profits weren’t important, it’s no doubt you’d love to pay your employees their dream salary. Unfortunately, that isn’t realistic. That’s where competitive salary becomes useful for both employers and job-seeking graduates.
For graduates, a bit of quick research using a site like PayScale or Glassdoor reveals what the industry standard for a position is. So even without an exact number, they still have a good idea of what their salary could be when they apply or go in for an interview. Depending on their experience and education level, graduates can also determine whether they should make slightly more or less than the market rate. This knowledge puts some of the power back in the graduates’ hands.
For employers, stating “competitive salary” in a job ad gives them the opportunity to budget for the new hire without setting a number in stone. Just like graduates, employers enjoy having room to negotiate and the potential to save a little money. It often goes in their favor, because 49% of job candidates won’t bother to negotiate at all. Additionally, salary information has become increasingly confidential in order to prevent unfair discrepancies in compensation. Listing competitive salary enables employers to keep the exact numbers confidential.
What does it achieve?
A competitive salary indicates to graduates that their skills are wanted, appreciated and will be compensated fairly. From the moment they read the job ad, graduates can tell that the company in question cares about treating their employees right. As soon as they start the job, a competitive salary has already motivated a graduate to do their best and work their hardest. In short, it shows that employees are an asset to the company, not just another expense.
In a recent study by SHRM, 63% of employees reported compensation was very important to them. However, only 23% of those employees said they were satisfied with compensation. Offering graduates competitive pay means that satisfaction will be higher from the beginning; they know they’re getting at least the standard going rate. Anything over the standard market rate only serves to increase engagement even more.
So, what’s the bottom line?
When you’re looking to attract new college graduates, consider listing “competitive salary” in your next job ad, rather than a firm number. It’s important to remember the other traits that attract top talent, like career development, flexible work schedules and company culture, but salary still tops the bill.
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