In a modern employment market characterized by rapidly shifting employee demands and expectations, there are myriad things to consider beyond simply the salary you offer when hiring for an open position — benefits such as flexible working arrangements and wellbeing support are increasingly important to existing employees and prospective hires, for example.
That said, the salary you’re prepared to pay is still the biggest deal-breaker when it comes to attracting and retaining talent, with almost a third of employees saying they choose who to work for based on an attractive financial package.
But settling on an appropriate salary isn’t easy. You’ll likely struggle to acquire top-tier talent if you’re not prepared to pay the going rate, for one thing, but of course, you’ll also want to manage your budgets and your recruitment costs carefully.
There’s a long list of things to consider when deciding what salary to offer, and below, we’ll explore 5 of the most important factors. Struggling to know what you should pay a new hire? Read on.
Job role and responsibilities
It goes somewhat without saying that the primary determining factor when it comes to deciding on an appropriate salary is the nature of the role itself. Think foremost about the responsibilities a prospective employee will be expected to carry out, and what level of remuneration these responsibilities warrant.
For instance, an entry-level administrative role that encompasses mainly low-impact, low-responsibility tasks will not command a high salary — and applicants should not expect this — while a senior decision-maker whose role requires strategic thinking and whose work involves business-critical responsibilities should expect to be paid a fairly handsome amount.
In simple terms, the complexity and scope of a role directly correlates with pay scale. Those with higher levels of accountability or a more influential or extensive remit are typically rewarded with higher salaries, while those with slightly more elementary responsibilities and less authority to make key decisions will be paid a more modest financial package.
Industry benchmarks
When determining what salary to attach to an open position, it’s important that you have an awareness of industry standards. This requires you to gain a clear understanding of what similar companies within your industry — or those outside your industry but advertising similar roles — are offering prospective employees.
Understanding industry benchmarks around salaries is crucial if you want to remain competitive in the job market, of course — since you may lose talent to competitors if you’re not offering at least the going rate — but it’s also important for attracting the right kind of candidate. Offering a salary below industry standard may attract under-qualified applicants, for example, while going too high may lead to you hiring someone overqualified for the role.
The question is, how can you monitor and analyze salary data from multiple other companies without it becoming a mammoth manual task? Well, one option is web scraping, a process whereby you can extract data at scale from job boards and company websites — if you’re unsure how this works, check out this guide to web scraping from ScrapingBee.
Skills and experience
Many businesses advertise open roles stating that the salary is dependent on experience. While this is inherently true for most vacancies, it’s nonetheless important to include a salary range in your job listings, regardless of whether the salary is likely to vary significantly based on the skills and experience of the individual you end up offering it to.
Of course, the elasticity of your salary range ultimately depends on how flexible you’re prepared to be when it comes to candidate skill and experience levels. You may have very specific criteria in terms of qualifications and background knowledge, in which case you’ll likely have a rigid salary range in mind. On the other hand, you may be willing to consider applicants with varying degrees of proficiency and know-how, and be open to negotiation.
In any case, it’s important to outline your criteria clearly before advertising the role, ensuring that you’re offering an appropriate salary but also that applicants are under no illusions about the skills and experience they’re expected to bring to the role.
Company size and budgets
In any business, there are certain factors that are more-or-less out of the control of the hiring manager when considering what salary to offer a potential employee. For instance, the size, success, and renown of the company may impact the salaries you’re able to pay your new hires, while most well-run businesses have stringent predetermined budgets in place.
Startup companies and small businesses, for example, may simply not have the resources to offer large salaries and benefits packages — factors such as flexibility and progression opportunities may prove key here — while larger enterprises typically have a more ample cash flow and can often afford to reward their employees with higher salaries.
The cost of hiring an employee isn’t restricted to just their salary, either. There are multiple other factors to consider, such as advertising costs, agency fees (if you’re hiring through a recruitment agency), referral bonuses, and the cost of training a new employee once you’ve onboarded them.
Geographic location
Increasingly, an employee’s geographic location is a determining factor in the salary you might be prepared to offer them. Historically this may have entailed supporting relocation or covering commuting costs, but with many companies hiring remotely now, there are other location-related costs to consider.
For example, you may need to consider the average cost of living for the area your prospective employee is based in. They may live in a location (possibly even another country) with a comparatively low (or high) cost of living, meaning you may be able to pay them less than the industry average, but equally, you may need to factor in additional financial support.
As is evidenced here, multiple determinants are at play when it comes to setting a salary. It’s important to consider all of these factors and make a considered, data-driven choice. Remember that a salary is determined not only by the role’s responsibilities and the level of skill and experience required, but also external factors such as industry standards. The goal is to be competitive in the market while managing your costs efficiently.