Low unemployment rates are creating continual upward pressure on employee compensation. In a well-meaning but misguided effort to control costs, many companies are beginning to offer creative hiring incentives like flexible work hours, signing bonuses, tuition reimbursement, stock options, and more to offset starting salary increases. These incentives reduce the company’s exposure to long term salary commitments and are more easily reduced or eliminated during tough financial times. The incentives “appear” to round out competitive total compensation packages for the candidates as well. In reality, these “packages” are thinly disguised efforts to low ball starting salaries with the promise of potential bonuses and perks. While they may be excellent tools to sweeten a competitive offer (and often make or break a candidate’s decision) bonuses and benefits do not make up for a competitive base salary. Here’s why:
A lower base salary is the definition of a pay cut
Since most of the top talent is already employed, a hiring package needs to be persuasive enough to move a candidate away from his or her current position and into one at your company. Unless your company is already turning away long lines of potential job seekers, you can’t expect sharp candidates to accept a sleight of hand when it comes to their compensation. In order to even consider your offer, these candidates are expecting salaries at or above their current pay rates. If they receive an offer with a low base salary (even if it includes the opportunity for bonuses and benefits) – this is essentially a pay cut. Candidates will see it this way. Bonuses and benefits should always be “on top of” but not “in place of” a competitive base salary.
The long game is more important than a quick hire
If you do manage to convince a candidate to come aboard for a pay cut, they’ll be an automatic flight risk if the promised benefits and bonuses don’t live up to their expectations. Hiring is not just the short-term act of adding an employee to your team. Real hiring includes the long-term task of retaining your employees by valuing, rewarding, and protecting them as the assets they are. This includes a competitive base pay.
Candidates are well educated
The hiring market is evolving – and fast! Candidates now have multiple resources available to give them an accurate and up to the minute understanding of modern job and salary expectations. If one or both are missing the mark, they’ll know. It’s too much of a candidate’s market for companies to try to do a bait and switch with candidates’ starting pay.
Recruiting isn’t persuasive when salary offers are low
When Pivotal goes to work for your company, we dive into the position headfirst. We work with you to learn all the details and nuances there are to know about the position you’re hiring for. We also work with candidates to learn what they’re looking for in an ideal job. By doing so, we quickly determine what the standard salary range or “market value” for that particular role is. It is both undesirable and unworkable to try to “sell” candidates on an undercompensated position.
Candidates won’t bite
Pivotal will work to find candidates willing to accept a job within an appropriate salary range for any given position and will manage candidate expectations for this type of offer. When the hiring company counters with a base salary below this range but uses bonuses and benefits to get the total compensation above the agreed upon threshold – everyone gets upset. Candidates feel let down due to mismanaged expectations and don’t “bite” on the position. Companies create hard feelings and lose out on qualified candidates. And recruiters are unable to achieve their goals of happy, employed candidates and happy, staffed clients.
How much is a candidate worth to your company’s future?
In the end, companies are usually left with no option but to offer the higher base salary they were trying to avoid if they truly want to hire a particular candidate. It’s more than likely that the extra time and money spent trying to sell a lower salary is greater than the cost of offering a competitive salary from the get go. Bonuses and benefits are fantastic “extras.” Meanwhile, the “benefits” of a competitive base salary are abundant and far more effective for your recruiting, your company, and your employees.