What is the meaning of competitive salary?
A competitive salary ensures that a worker is getting paid market rates at a job. Several criteria are considered when a competitive salary is mentioned. Criteria include what workers at the same company make, cost of living adjustments, cost of workers in related industries, hours worked, and mandatory training requirements.
A competitive salary is comparable to what workers at the same company make. This is measured by standard criteria, such as seniority at the company, performance metrics such as sales, and responsibility at the company. A competitive salary also includes other types of incentives such as performance bonuses and commissions if other workers performing similar jobs at the company receive these.
Cost of Living
Cost of living adjustments affect competitive salary calculations. Rural areas often cost much less to rent or own property in than cities or suburbs, and salaries reflect this. Large employers including the federal government adjust their pay scales according to the location where a worker is assigned. Cost of living is also affected by regulations such as state income and property taxes, as well as the cost of air conditioning and heating which may be substantial.
Cost of workers in related industries is also a factor. Some workers, such as sales experts or managers, know a general skill set that is useful at many companies. The prestige of an industry also effects compensation. Jobs such as researchers at a university may pay less than a job in the related manufacturing industry. Non-profits pay workers less money as the staff are giving up benefits to make a difference in the world. According to the University of California-Santa Barbara, market-based pay structures compare salaries to jobs with similar duties at other companies.
A salaried worker is paid by the week instead of by the hour. Salaried jobs usually include more flexibility for this reason, including hours required per week. Some managers at salaried jobs expect their workers to work 100 hours a week, others expect 40 hours or less. The hours worked affect competitive salary, as a higher weekly wage at one company may provide less earnings per hour if the managers expect a worker to work more hours.
Mandatory training requirements affect a competitive salary. Many jobs require continuing professional education, which requires the worker to take additional courses each year to remain qualified for their job. If a company provides paid training, the worker does not have to pay for courses, so this is part of a competitive salary.
- University of California: UC verifies Competitive Compensation, Low Turnover Among Nurses During Second Round of Labor Negotiations
- University of California Santa Barbara: The New Compensation Plan for Managers and Senior Professionals
- US Office of Personnel Management: 2010 Salary Tables and Related Information