This blog post is an excerpt from our new ebook Comp is More Than Data: Why You Need Salary Ranges and How to Create Them
If you have 50 employees today and you’re planning to grow next year, it’s time to put salary ranges in place and develop guidelines about how to use them.
Salary ranges are the essential guardrails for decision-making: They help you decide much you’re willing to pay for new hires, how you plan to reward existing talent – while keeping your goals and budget in check. As you add more headcount, the budgetary impact of payroll becomes significant. Additionally, creating salary ranges now can save you from a host of issues that can surface down the road.
How Salary Ranges Support Business Growth
- Consistency in Hiring
One of the biggest benefits of creating a salary range for each position is consistency. When you take the time to define your talent market (who are you competing with for talent), decide how you want to pay relative to the market (lead, match, or lag), and what you want to reward (e.g. skills, experiences, performance, etc.), you will be able to consistently hire the right candidate profile.
The downstream benefits of consistently targeting the right profile are many, including decreased time to fill, decreased cost per hire, reduced losses in productivity, and improved candidate experience.
- Increase Offer Acceptance Rate
Another benefit of having solid ranges is one you might not expect: it allows you to make the candidate your best offer upfront — one that actually excites them.
If you are confident in your data and your ranges, you can be open with candidates about how you’ve determined their initial compensation and future compensation trajectory. This unusual practice can help you create goodwill with candidates, screen out the wrong candidates, leading to a better outcome for both your company and job applicants.
- Mitigate Risk of Pay Inequities
Last but not least, creating solid ranges will help you avoid creating pay inequities in the future. Pay equity issues are much easier to avoid than to fix.
Here is a common example of what could happen when you do not have or don’t adhere to a range for a position. You have two candidates, Anna and Brad. They bring nearly identical experience, and you’re offering both Account Executive roles.Anna is particularly excited about your company and she accepts your first offer. Brad pushes back on your initial offer, so you decide to increase Brad’s offer by 10%. Everyone is happy, for now…
Fast forward three months, Anna and Brad are now comfortable enough with each other to discuss compensation. Anna finds out that Brad is paid 10 percent higher, despite their similar background. How do you think Anna feels now?
Developing salary ranges informed by market data and adhering to them is the best way to avoid pay inequity. To create ranges for your jobs, you’ll need to select the appropriate market data sources to anchor your ranges to.
To learn how to choose the appropriate market data and use them to build salary ranges, check out our ebook Comp is More Than Data: Why You Need Salary Ranges and How to Create Them