Whether you’re just starting to consider what to pay your employees or yourself or you’re considering a raise or deduction, you need to know if your wages are competitive. Without competitive wages, even the most loyal employees can only hang on for so long before they have to cut you loose and look for a job that meets their needs. Remember, your employees are primarily interested in getting a job to make money, so you have to make sure your wages make sense for the work that they are doing. Otherwise, you could end up loosing great employees. Here’s an evaluation that can help you determine if your wages are competitive.
Look at How You Determine Wages
The first thing you should do when determining whether or not your wages are competitive is to scope out the competition, and do your research. You should know what the industry standard is for pay for positions you are hiring out. Remember that what is competitive isn’t always what’s affordable for you as the leader of your company, but if you can’t pay a competitive wage, you’re going to have a hard time finding anyone willing to work for you.
Whether or not you’ve looked at what your competitors pay their employees, do it right now. Look at more than one different company—this should show you the average wage for the job you’re looking at. Think of this as the “market rate” for the level of skill and/or specialization that your job requires.
Consider Cost of Living
Another thing to think about when determining competitive wages is the standard cost of living in your area. As the economy grows, everything becomes more expensive—this is called inflation and it is inevitable and, in general, irreversible. It’s why you could by a candy bar for a nickel thirty years ago but now have to pay a $1.25 for one.
The higher the cost of living in your area, the more you have to pay or be paid in order to live there. This also generally means that people who live there spend more money, which allows you to make more money, but if you need a competitive wage to keep your doors open, you’ll have to start by paying someone fairly before you can start reaping the benefits.
You can use these factors to determine whether or not your wages are competitive or not. If they’re not, you’ll have high employee turnover. If they are, you have a better chance of holding on to quality employees that make your business better and bring you more profits.