What is a competitive salary?

A competitive salary refers to a compensation package comparable to those offered by other employers. For a similar job, a competitive salary equals or exceeds the standard offered by companies in the same industry or location.

Competitive pay generally includes industry-standard salaries, benefits and bonuses. Flexible work, paid family leave and career development plans are a few examples of additional perks that can attract job seekers.

While some employers include the term “competitive pay” in their job descriptions, it may be unclear to job seekers what the salary translates to in a numerical amount. When offering competitive salaries for your open positions, consider including an actual salary number or range in your job description.

Building a compensation package

Your pay package offerings may depend on company size, available budget and employee preferences. One-on-one conversations, surveys and focus groups can help you learn what incentives motivate your team.

For example, your staff may be more interested in a good retirement plan or flexible work arrangements than higher pay. Find out what’s most important to your employees so you can adapt your compensation package.

Why is it important to offer competitive pay?

You may offer competitive wages for several reasons.

1. Commitment pays off

Providing a competitive wage helps show employees you care and value their contributions. It may also indicate you’re willing to invest in them. This loyalty can translate into increased productivity and engagement.

2. Paying more can reduce costs

Paying employees a competitive salary upfront may save your company money in the long term. When your staff is satisfied with their compensation, your organization may save on recruitment expenses, such as hiring and training new team members.

Offering competitive pay can also improve employee performance. Team members who feel fairly compensated for their skills and expertise may be more productive.

How do you determine competitive pay?

These considerations may help you determine salary competitiveness:

• Industry trends and standards: Find out what your competitors offer for a similar position while considering your company’s industry and size.
• Location: Consider your business’s location. Salaries typically vary from state to state and even city to city. You might research pay rates and the cost of living in your area.
• Supply and demand: If you’re recruiting for a position that requires highly specific skills or experience, you may have a smaller candidate pool. Competitive pay may help you attract quality candidates from that selection.

Where can you find wage information?

The U.S. Bureau of Labor Statistics is a reliable resource for information about wages. Data is classified by industry, location, job characteristics and the complexity of the work. Checking the site may help you determine a competitive salary range to offer potential hires.

Indeed Salaries also provides compensation insights for roles across numerous industries. By inputting the job title you’re hiring for, you can discover the average base salary for the United States, as well as the highest-paying cities for that role.

What does a competitive pay package include?

In addition to competitive pay, you might offer a comprehensive compensation package to attract and retain top talent. Here are some benefits to consider.

1. Health insurance

Offering health benefits to employees can help your company gain a competitive edge. In the United States, employees often consider this benefit one of the most important.

2. Retirement plan

Retirement plans let employees save part of their salary before taxes are taken out. Common retirement savings options may include 401(k) plans, savings incentive match plan for employees (SIMPLE) IRA plans and Roth IRA plans.

3. Paid time off (PTO)

PTO from work is a benefit that provides hours employees can use for vacation, sick leave or personal reasons. PTO helps promote a healthy work-life balance, which can positively benefit your workforce.

Related: How to Create a Time Off Policy

Pros of competitive pay

A competitive pay rate can influence an employee’s overall job satisfaction. Workers who feel they’re paid fairly may be more motivated to help your company achieve its goals. Competitive salaries can also lead to employee retention, high morale and a positive work environment.

As you determine a competitive salary for your company, you’ll likely need to adapt your salary and compensation policies to keep up with the fluctuating job market or employee needs. Consider how continuous training, a positive team culture and perks like wellness plans can also help you attract and retain workers.