Retain Your Staff With A Competitive Salary

Salary is a very sensitive topic in India. The average salary of a skilled worker is around ₹15,000, with significant fluctuations depending on location, industry and skill level. In this regard, India is far behind the developed nations of the world.

Further, there is also a very common perception that workers are generally underpaid in India. A 2021 EY – Refyne survey further strengthens this argument with its results: an overwhelming 80 percent of employees in India don't get enough to cover their monthly expenses.

If you are a recruiter, this situation provides both opportunities and challenges. An employer who pays a competitive salary should have no trouble attracting the best talent. But the big question is: how to determine a competitive salary? Let's explore the solutions.

What Is A Competitive Salary?

In the job market, there is a standard rate of pay for every position. This is usually the average salary paid by all employers for a particular position is a specific industry or sector. You can say that an employer is providing a competitive salary if the amount is equal to or above the industry standard.

Along with your monthly pay, industry standards may also include other benefits – hazard pay, commissions, insurance, and allowances. These can vary based on the nature of the work; for example, workers in hazardous jobs like construction or mining, or in special circumstances like graveyard shifts will get additional incentives.

In most situations, a competitive salary mainly looks at the monthly pay. However, in jobs where the monthly pay is quite low, an employer can add additional incentives to make the offer more attractive to jobseekers.

How Much Is A Competitive Salary?

There is no straight and easy answer to this question. Many variables can affect the average and competitive salaries for any given job. For instance, even in the normally lucrative IT field, the salaries for freshers tend to be relatively low in India.

According to a 2021 Money Control survey, 82 percent of freshers reported that they were being underpaid. But once you go past a certain experience threshold, the competitive salary for the same position can skyrocket.

Then there are geographical considerations and the extreme impact they can have on the cost of living. A fresher post in a Tier 1 city like Mumbai would require a much higher starting pay package than a similar post in a Tier 2 or Tier 3 city.

Lastly, basic market forces also play a major role in determining the industry standard salary, particularly in a country like India with a young and growing population. The urban unemployment rate in India has edged past 8 percent in 2022.

With the availability of surplus labour and multiple candidates for a single vacancy, recruiters can afford to lower the salary and still manage to get capable new hires.  

How To Determine Competitive Salary

Figuring out the competitive pay package for a particular position in your company is not an easy task. The job market is quite dynamic, and salary rates are highly sensitive to macroeconomic factors like inflation, cost of living, labour laws, the latest technology trends, and more.

You will have to do some background research and conduct a competitive salary analysis to get a better idea. It has the following basic steps:

Compare Your Rates With The Competition

Ideally, you want to offer rates that are better than your direct rivals in the market. For a competitor's analysis of pay packages, you can start by checking online platforms like Indeed. Look at the rates advertised by your rivals and see how your company’s rates stack up in comparison.

Are they offering skill-based pay instead of job-based pay to attract experienced talent? If your rates are too low, you have a major problem on your hands. Likewise, if you are paying significantly more than the competition, that is also bad news since you may be overpaying. Either way, a review of your remuneration policies is in order.

When looking at particular posts, pay less attention to the job title and look at the descriptions instead. A ‘manager’ is a vague term; some firms may pay ₹50,000 while others pay ₹75,000 - it all depends on the actual scope of the position.

Ensure that all the job designations in your organization have detailed descriptions of duties and responsibilities. This will facilitate more accurate comparisons.  

Check Local Labour Market Statistics

The government labour department's annual surveys and reports provide a decent starting point for your labour market research. However, for additional insights and data accuracy, you should also look at the publications from your industry associations and private consulting firms.

Surveys are a great source of information and insight. Companies often do not publish hard numbers regarding their remuneration ranges. But individual survey participants tend to be more candid in their responses to questions related to salary packages. Use it to your advantage.

Analyse Your Financial Situation

From an employer’s perspective, the ideal salary is a competitive rate that covers the full cost of the position to the company, while delivering additional value. For example, if a sales manager will cost you ₹60,000 under the current market rates, check to see if adding that position will at least improve your revenue generation by 100,000, or more.

Don't forget that you will have to increase the package in the future. This is a quite complex task, since the salary breakup has multiple components. The rates should be set low enough to accommodate future raises and bonuses without harming your balance sheet. 

If you set it too high to attract candidates, you may face a situation in the future where they quickly reach the salary cap for their position. A high salary for a new hire can also upset the existing salary structure in your firm, having knock-on effects on workplace morale in the process.

Is Salary Still Important In The Era Of The Great Resignation?

The impact of the pandemic on the job market has been well publicised. For most employees in the younger generations, work-life balance, career advancement opportunities and a positive company culture are as important (if not more important) than a large pay-check.

A 2022 Michael Page survey indicated that 61 percent of employees in India were open to a new job with better work-life balance, even if it meant taking a salary cut. This is particularly valid for highly specialized jobs in the IT and engineering sectors.  

That does not mean that you can ignore competitive pay packages. To land experienced ‘rockstar’ candidates, you will need a compelling package – good salary, additional bonuses and perks, and above all, a positive and vibrant company culture.