Competitive Pay: What It Means and How To Get It
For anyone who’s spent time searching for a job, you may have come across the same hiring buzzwords over and over again. A phrase commonly used in job descriptions to attract top talent is “competitive pay.” While these two words are enticing to those looking to level up their earning potential, it’s not always clear what it really means. To help you understand this term and what it means for you, read on for a definition of competitive pay, details on what’s typically included in a competitive compensation package, and steps for how to get one.
What Is Competitive Pay?
When it comes to compensation, the label “competitive” refers to pay that is comparable to or better than the market value of a position. In human resources, a competitive salary is the average market rate for the role, plus a percentage of that rate. This percentage may vary depending on a company’s pay philosophy. It also means that compensation is competitive in relation to what other companies might offer for a similar position in the same industry and geographic area.
5 Factors That Determine Competitiveness
The market value of a position can fluctuate depending on a variety of factors such as industry and location, so it’s important to note that pay may vary and it isn’t necessarily a specific amount. Find a breakdown of the factors that can affect compensation below.
1. Job Title
When it comes to determining a competitive salary, the role itself will often have a baseline for market rates. Use reliable industry resources such as the Bureau of Labor Statistics (BLS) to assess compensation rates for your role. Once you have an idea of the average market rate, use this number as a guide to evaluate salary competitiveness. Remember that salary ranges can differ based on the role, so make sure you’re referring to an accurate job title when doing your research.
2. Experience Level
Most positions will offer pay that corresponds to either your experience level or the experience necessary for the job. Whether the role is entry-level, mid-tier, or higher, often determines the experience level required and the associated salary range. For example, entry-level positions require zero to little experience and are generally compensated less than mid-tier positions that may require several years of experience. Your education and practical skills all factor into your experience level, and the demand for your skill set should be kept in mind when determining a salary that is competitive for you.
The industry your desired job is in has the power to affect the standard of competitive pay. Lucrative industries like tech and finance may have more competitive rates compared to other industries in order to secure top talent.
If you have a desired career path and aren’t set on a particular field, it’s worthwhile to apply to the same position in multiple industries to see how compensation packages may differ. For those who have a high salary as their goal, research earnings by industry and apply to various companies within the highest paying one to find the most competitive pay for you.
Location also affects the average market rates of a position. Places with a higher cost of living and higher minimum wage standards typically compensate more to account for these factors. For the most accurate salary and wage information, it’s best to tailor your research to a specific geographic area. The BLS produces data on wages based on region, state, and many metropolitan areas.
5. Job Availability
Much like market prices vary based on supply and demand, salary does too. When a job is in high demand but lacks supply, pay is likely to be more competitive. On the other hand, if a position is in low demand but there are plenty of qualified candidates, this will likely decrease the market rate of the position. If you’re interested in a hiring pool that works in your favor, check out this list of the fastest growing jobs for in-demand positions.
What’s in a Competitive Compensation Package?
Competitive pay doesn’t refer to just salary; it actually encompasses the entire compensation package. Learn more about what other benefits are included such as paid time off, insurance, retirement options, and other bonuses.
Paid Time Off
One important aspect of any compensation package is the amount of paid leave that’s offered. Time off from work is important to your health and wellness, and it’s also necessary if something changes in your personal life or if you get sick. Vacations are also a good way to set boundaries at work to prevent burnout. When you’re able to balance your life and work, you can maintain your performance and work toward achieving your personal and professional goals.
Health insurance is another standard part of a compensation package and is generally offered to varying degrees depending on whether your position is full time or part time. Medical, dental, and vision insurance are rated as some of the most desirable employee benefits, so it’s no surprise that better quality health coverage is often a prized aspect of competitive pay.
Many companies also include retirement plans as part of their compensation. Depending on your employer and your options, you can contribute part of your paycheck toward a 401(k), 403(b), or Roth IRA to start saving for retirement. Oftentimes your employer will match a certain percentage of your contributions, so it’s good to take advantage of this by contributing the maximum amount allowed each year so long as you can afford it.
While salary, paid time off, health insurance, and retirement options generally make up a standard compensation package, they’re not the only options available to you. When evaluating a job offer, feel free to ask about other compensation benefits like bonuses, stock options, and profit-sharing. Here are a few examples to ask about in your next salary discussion:
- Signing bonus
- Performance bonus
- Relocation bonus
- Stock options
- Profit-sharing plan
- Supplemental budget (e.g., for wellness or career development)
How To Ask for More Competitive Pay
When a job description states competitive pay, it’s a positive sign that the company or organization is willing to negotiate compensation. Remember that competitive compensation is determined by a variety of factors, including factors that are unique to you as an applicant. Leverage this information and try negotiating for the pay you want with these simple steps.
1. Pick Your Priorities
When entering into a salary negotiation, it’s best to know your priorities when it comes to compensation. A higher starting salary is a major negotiation point in many salary discussions, but depending on budget constraints or company pay scales, it may not be possible. If this is the case, think about what other forms of compensation would be valuable to you. You may be more successful asking for a one-time signing bonus instead of a higher salary or decide that stock in the company is more in line with your financial goals.
2. Backup Your Request With Evidence
Just asking for a higher starting salary or better benefits isn’t enough. To successfully negotiate better pay, you’ll need to present a strong argument. Use the research you gathered about the market rates for your particular position, location, and industry as evidence in your argument.
Remember that competitive pay is, at the very least, equal to that average market rate or better, so use this number to guide what you ask for. Craft an argument for why you’re worth a higher salary or better benefits by highlighting your achievements, skills, or experience that will bring value to the position.
3. Politely Stand Your Ground
HR professionals are prepared for salary negotiations, and even if they have the wiggle room, they may respond by saying that the position is budgeted for the amount they originally offered. When this happens, it’s OK to politely push back and ask them to explore your request.
Not sure how to push back in a professional way? Try saying the following:
“I understand that the position is budgeted for [insert amount], but based on the value my skills and experience can provide to the team, I’d appreciate the opportunity to explore a higher salary of [insert desired amount].”
After saying this, they may let you know that’s all they can offer or they could come back with an offer that’s better than the original. Don’t miss out on the potential for a better salary and remember to stand your ground.
Now that you know what competitive pay means, feel free to get excited whenever you come across this term during your job search. Keep in mind that competitiveness will vary based on the market rates and what you bring to the table, so adjust your salary expectations based on your research.
Even if your research doesn’t yield your ideal pay, be confident in your skills and use these tips to negotiate the most competitive compensation package possible. Whether you end up with a signing bonus, more vacation days, or that coveted higher salary, you and your budget can be happy with your achievement.