Market rates help you know your minimum salary.
When you’re trying to woo an amazing candidate, you’ll want to look at their potential value to the company when deciding how high you can go in salary negotiations. But when you’re trying to determine the minimum you’d offer to a candidate who’s either a bit of a wild card (career changers, self-taught, fresh out of school, etc) or just okay? You need to make sure your lower range is high enough to avoid insulting your applicants or turning them away.
This is where market rates come into play.
Market rates are variable.
Unless you are hiring for a position that is generally both stable and unionized, market rates can vary wildly over time. Part of this comes from demand: if you’re running a spa and a particular massage technique gets featured on Dr. Oz, demand for trained practitioners in that technique might suddenly increase, driving up the rates those massage therapists can command.
Part of this is also supply: when a competitor suddenly goes under and the marketplace is awash with high quality laid-off experts, market rates can go down. And of course, the economy as a whole impacts the ratio of job-seekers to available jobs.
Similarly, some positions have seasonal fluctuations: demand for customer service representatives in retail balloons from November through January, while the supply of entry-level professionals swells during graduation season every May and June.
All of this means that the research you did two years ago when hiring for a similar position might no longer hold, so make sure the information you have is fairly up to date.
Market rates are impacted by location.
Obviously, cost of living is going to be the biggest factor when it comes to geographic variability in market rates. Des Moines is not Honolulu is not Ypsilanti is not Seattle is not DC. A publisher in Indianapolis doesn’t need to earn the same as a publisher in New York City, because they can survive (and thrive) on so much less in the Midwest.
On the other hand, if you are located in a rural or otherwise hard-to-reach location, you may struggle to find talent locally and need to ask people to relocate. It’s one thing to ask people to relocate to a metropolis with a reputation for art and food and music. It’s quite another to ask people to relocate to somewhere that’s hours from the nearest airport and where town sizes are measured in the number of stoplights they have. (While small towns can be amazing, it can be really difficult to convince people who are accustomed to cities or suburbs of this.)
Location can also impact both supply and demand for quality workers. Yes, there are a lot more editors in large cities. But what if you really need a cattle ranching expert? That balance will undoubtedly change.
Even in all this complexity, applicants can’t afford to ignore market rates, and neither can you.
Your candidates have all looked at Glassdoor, LinkedIn, and talked with their industry contacts and friends. They know what’s about average, what’s understandably higher or lower depending on the time, economic outlook, industry trends, and location.
And if you make an offer that’s excessively low, they probably won’t see you as a manager who didn’t have time to do market rate research, they’ll see you as part of a company that doesn’t value its people. And when those former applicants end up working for competitors, they’ll take that impression with them.
Setting salaries is challenging, but it doesn’t have to be a terrible experience.
Sometimes a little guidance on how to think about the process is all you need to move forward with more confidence. Where can you get that kind of good start? Right here. Download How to Set the Perfect Salary today.
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