Building salary and benefits packages that work is essential in today’s competitive job market, where the battle for top talent is fierce and poaching from competitors has become increasingly common. Skilled employees are in high demand, and many businesses find themselves losing key people to rivals offering better pay or more attractive benefits. To not only attract but also retain the best candidates, companies must move beyond basic salary offers and create compensation packages that balance competitive pay with flexible benefits and career development opportunities.
According to McKinsey, talent poaching has surged exponentially since 2022, during the period known as the “Great Resignation.” This means offering a competitive salary and benefits package is no longer just about retaining your best employees – it’s also crucial to attracting new talent. Over recent decades, employee expectations have shifted considerably. With inflation driving up living costs, many workers now expect an average pay rise of around 4.5%, and 72% say salary remains the most important factor when choosing a job.
However, monetary compensation isn’t the only consideration.
About 66% of employees are willing to accept a smaller pay increase in exchange for benefits like flexible working arrangements and enhanced sick leave. To truly stay competitive, companies must move beyond simply matching market pay – they need to upgrade their entire employee value proposition.
This guide will walk you through how to build salary and benefits packages that work, helping you stay competitive and retain your best talent.
Understanding Modern Compensation
Compensation packages have grown increasingly complex in recent years. In the past, all you needed to do to attract talent was offer a salary that matched market rates. Now, skilled candidates expect companies to combine competitive salaries with comprehensive benefits, flexibility, work-life balance, and opportunities for flexible growth.
According to the Harvard Business Review, in some industries, employees also expect companies to introduce annual incentive plans, with extra bonuses for excellent performance. Today’s companies need to consider the following:
Base Pay Dynamics:
Base salary remains a key part of any strong compensation package. According to the Australian Bureau of Statistics, average wages are expected to rise by around 4.5% this year, with candidates holding specialist skills likely to see even higher increases.
With rising living costs and inflation putting pressure on employees, they expect employers to respond with fair pay adjustments. Given the high demand for skilled workers, many are prepared to change jobs quickly in search of better remuneration.
The Benefits of Evolution:
Employee benefits have transformed significantly, moving beyond traditional offerings like retirement plans. Modern employees expect personalised benefits that cater to their needs. This includes mental health support, financial wellness programs, and flexible working arrangements.
Many employees are willing to accept lower salaries in exchange for flexible rewards like adjustable schedules, training opportunities, or even equity in the company.
They’re also prioritising greater work-life balance, searching for remote working options, and improving mental health support.
Development Costs:
Investing in top talent also means investing in your employees’ potential, providing them with the training and resources they need to achieve more in their roles. Investing in mentorship, training programs, and courses also costs money, but it’s crucial to attracting and retaining top talent.
It’s also the key to improving the return on investment from hiring initiatives, ensuring companies can give their teams the skills they need to thrive in a changing landscape.
Identifying Baselines: Developing Your Salary Strategy
To compete for talent in your industry, you need a clear understanding of the standard “market rate” for specific employees and the salary benchmarks. This means investing in comprehensive research, as expected salaries can vary drastically based on a company’s location, the skills of a professional, and the industry.
Begin by evaluating the current market rates for roles within your industry. This involves collecting data on average salaries, bonuses, and benefits for comparable positions. Online reports and intelligent benchmarking tools can give you a basic insight into the types of “salary ranges” certain employees expect based on location, skills, and industry factors.
However, don’t rely on those reports alone, as they can offer a fragmented view of the market. Instead, do your own research into the remuneration packages offered by competitors. Pay attention to the overall value of the package they offer, looking not just at base salaries but also at annual incentive schemes and benefits.
Remember that variations are common among industries and locations. For instance, Sydney jobs often offer the highest wages due to the higher cost of living. However, some companies can afford to provide lower salaries by offering remote working options.
Compare the results of your research to your current remuneration strategy. If you’re falling behind in compensation, think about what you can improve – the base salary, the benefits package, or even your approach to skill development.
Going Beyond Base Pay: The Impact of Benefits
In a competitive job market, base salary is far from the only thing that matters. Employers are struggling to meet salary expectations. Fortunately, companies can still compete with the right benefits.
Employees increasingly value a holistic approach to compensation that encompasses a well-designed benefits package, flexible working arrangements, opportunities for learning and development, clear career progression paths, and robust recognition systems.
Focus on finding opportunities to improve your EVP through the following:
Benefits Package Design
Creating a thoughtful benefits package is pivotal in meeting the diverse needs of employees. While traditional benefits like retirement plans remain essential, modern employees also prioritise offerings such as enhanced sick pay and higher Superannuation contributions.
It’s important to think about the workforce you have and the types of benefits that are realistic for them. You could offer different options depending on where they are in their work lifecycle.
For smaller businesses, this can seem daunting since increasing wage costs with added benefits is unfamiliar. However, use your size as an advantage by offering perks that appeal to those who value a close-knit work environment.
The Value of Flexible Working
Virtually every employee wants flexibility in the workplace. Workers are willing to forgo a pay rise to secure flexible working arrangements. Offering flexible working opportunities demonstrates your commitment to improving work-life balance and could help you attract more talent.
If certain roles don’t accommodate hybrid or remote working, consider exploring the benefits of a four-day work week or allowing employees to choose their working hours on certain days.
Learning & Development Opportunities
Investing in professional growth through continuous learning and development programs attracts more talent to your team and boosts productivity and retention levels. Provide access to training courses, workshops, and mentorship programs.
Show your team members you’re invested in helping them to achieve their career goals with clear progression pathways and structured development plans. Implement robust recognition programs to keep employees invested and motivated.
How to Implement a Salary & Benefits Strategy
Implementing a salary and benefits plan that remains competitive requires planning and regular review. In today’s employment industry, expectations evolve, and organisations need to stay agile.
Here’s how to start building your salary and benefits plan:
Assess your business needs:
Ensure you understand your business goals and how a strong remuneration package can help you achieve them. Examine your current compensation strategy to identify potential weaknesses and areas for adjustment, and use salary benchmarking to compare your offers with industry standards.
Get stakeholders involved:
Engage with managers and employees to understand their needs and expectations. Commit to developing clear materials for employees that outline compensation structures, performance metrics and growth opportunities. Regularly engage with stakeholders to collect insights and feedback and improve your plan.
Enable package customisation:
Address the diverse needs of your workforce by offering customisable compensation packages. This may include flexible benefits, variable pay options, and opportunities for professional development. Allowing employees to tailor their compensation plans can increase your chances of attracting and retaining top talent.
At the same time, as you plan to roll out your salary and benefits packages, remember legal compliance. Ensure you know minimum wage laws, overtime provisions, and anti-discrimination statutes.
Measuring the Results of Your Strategy
Once you’ve implemented your upgraded salary and benefits package structure, measure the results of your strategy. Pay attention to:
- Recruitment Success Metrics: Monitor time-to-fill positions, offer acceptance rates, and the quality of new hires to understand the attractiveness of your compensation packages.
- Retention Indicators: Track turnover rates and conduct exit interviews to understand if compensation is influencing employee departures.
- Satisfaction Measures: Use employee surveys and feedback mechanisms to gauge compensation satisfaction and identify improvement areas.
- Cost-Benefit Analysis: Regularly compare the financial investment in compensation against productivity, revenue growth, and employee engagement metrics.
- Market Position Tracking: Stay informed about industry compensation trends to maintain a competitive edge and adjust your compensation strategy as needed.
Review, Upgrade & Improve Compensation
In a competitive talent market, it’s more important than ever for companies to ensure they’re offering their candidates the compensation and benefits they deserve. Simply matching market rates is not enough. Companies need to invest in a comprehensive approach to upgrading their EVP with the right salary, benefits, and opportunities.
The concept of overhauling your remuneration strategy might be daunting at first, but the results will be worth it. The right offer will improve employee satisfaction and retention rates, reduce recruitment costs, and strengthen your market position.
As you work to build salary and benefits packages that truly meet your employees’ needs, having a trusted recruitment partner can make all the difference.
Work with Recruitment Central to Find the Right Talent
Hiring great people isn’t always easy, especially in today’s competitive market. At Recruitment Central, we bring practical experience and industry insight to help you attract and hire the right candidates. Whether you’re updating your salary and benefits or looking for skilled professionals, we’re here to support you through the process.
Reach out to us today to see how Recruitment Central can help with your recruitment needs and make hiring a little easier.
