What is competitive pay?

Competitive pay is the total compensation package awarded to an employee with a value equal to or greater than the market offering for a similar position in an industry and geographical area.

“Competitive” indicates that employers are offering compensation better than other companies to secure high-performing employees. This is a term often seen in job listings. Offering competitive pay also allows for more room to negotiate with highly qualified candidates during the recruitment process.

What affects competitive pay?

• Availability of talent: In areas where there is a lower supply of talent with high demand, this increases the value of candidates/employees. In this instance, an employee may likely be paid higher than average.
• Geographic area: Where your company is based will reflect the availability of talent and the level of pay. Two individuals working the same job may earn different salaries in different locations.
• Industry: Certain industries and professionals are likely to receive more competitive pay depending on the industry demand.

What does competitive pay include?

Competitive pay is a comprehensive remuneration approach – meaning it includes not only an employee’s salary but also other benefits. A competitive compensation package can include:

• Health insurance
• Dental and vision insurance
• Disability coverage
• Paid vacation leave
• Retirement plan
• Company perks (e.g., company car or housing)
• Variable pay – (e.g., commissions or bonuses)
• Work-life balance benefits (remote work, flexibility)

Why is it important to offer competitive pay?

• Reducing employee turnover
• Reducing time and money spent on recruitment (due to less turnover)
• Attracting the best talent
• Providing room for negotiating to get the best talent
• Keeping salaries competitive over the long term.