7 Factors that Determine the Right Salary Offer in IT, Healthcare, and Other In-Demand Industries
by Ed Daugherty
March 2, 2020
How much money will it take to make a hire?
It’s one of the most important questions a business leader or hiring manager can ask, yet it’s a difficult one to answer because of its wide-ranging implications. Offer candidates too little and your open roles will remain vacant. Offer candidates too much and you could break your budget, making it harder to hire for future roles. Based on our deep hiring experience in multiple in-demand industries, we’ve identified seven of the most important factors to consider when determining the right salary offer for your open roles.
#1. Geographic Region
Location is often one of the first factors to consider when determining an offer, but not always in the way you think. Perhaps you operate here in South Florida and understand our region’s dynamics, economy, and talent marketplace. However, where is the desired candidate coming from? If they’re relocating, they may have certain salary expectations based on their previous market. And, if they’re working remotely, their address matters just as much as yours.
Generally, the consensus is that roles in cities with a higher cost-of-living command higher salaries. But what if you operate in a rural area with population loss? You may need to increase rates to entice the talent you want to come to you. Furthermore, Dice reports that, while IT salaries are slowly rising, regions defined as emerging tech hubs have seen year-over-year increases well over 10%.
#2. Market Data
What are your competitors offering similar candidates? While you typically can’t ask your rivals, you can access market data in a number of places. Sources for such information can be formal government reports, news articles, or even industry conferences.
Here at IntellaPro, we created the 2020 South Florida IT Salary Guide to share the data we see firsthand. We work with many companies in this region, so we have a grasp on what real compensation looks like. While this grants an excellent vantage point, it’s necessary to take publicly-available market data as a guide rather than a hard rule. After all, averages are averages for a reason, and the factors on this list can and will shift the appropriate salary to offer a candidate.
#3. Industry and Function
It’s a simple fact of business that certain industries have more demand and see higher salaries as a result. However, the definition of an industry is broad. “Healthcare” as an industry can refer to many different types of organizations. Does an RN in a clinic or a retirement home earn the same as an RN in a hospital? While the answer isn’t always cut and dry, it’s often no. Each sub-sector of an industry will impact salary offers further.
This complicates compensation because today’s talent is versatile and may actually move from one industry or sub-sector to another while remaining in the same function, which is common in IT. A Software Developer in a startup will earn a different salary from a Software Developer in a major corporation like Microsoft, who will also earn a different salary from a Software Developer in the IT department of a retailer.
#4. Skill Level
With unemployment rates across multiple industries so low, the economics of traditional supply and demand equates to shifting salary offers. If you need an absolute expert in your open role, someone who 100% fulfills the role and can hit the ground running, then the salary offer you extend must be higher than market rates. If they’ve made themselves an expert in a niche, then they are in short supply. These individuals won’t settle for a low salary, and, if one is presented to them, they may accept a different higher offer on their plate without even negotiating with you.
Alternatively, if you’re willing to accept a candidate who is 80% qualified for the role, one who meets the most significant requirements and shows signs they can be trained into the perfect employee, then your offer can be decreased. Such individuals may be looking for growth opportunities and could value a career path in your organization more than money.
Salaries don’t exist in a bubble. They’re part of compensation packages, and it’s necessary to think in those larger terms when determining the right salary. Offering several exciting or unique benefits can lower the salary figure that will entice talent to join your team. Of course, the definition of a benefit is wide-ranging.
Robust healthcare, matching retirement contributions, unlimited time off, flexible scheduling, and remote working options are becoming more common. Some companies will try to think outside-the-box and offer lifestyle perk benefits such as phone discounts, free gym memberships, pet-friendly environments, onsite daycare, volunteering opportunities, and more. Finally, in an effort to lower the starting salary figure while increasing retention, some organizations will include long-term incentives in a compensation package. These provide clear-cut bonuses, investments, profit-sharing options, accrued time off, and other financial perks that pay off in the future.
#6. The Salaries of Current Positions
It’s a common approach: an employee leaves their role and a business uses their salary as a starting point for the offer of an incoming candidate. Instead, a best practice is to use this as a time to reevaluate the salary for that role. After all, didn’t the person who was in the role until now receive raises over the years? Are you bringing in someone with more or less experience? And what does compensation look like across that individual’s department?
Today’s strongest organizations are those that offer a degree of salary transparency. Employees who work in similar positions with similar responsibilities and backgrounds must be paid similar wages. Deviating greatly from one role to the next can cause engagement issues if employees sense they are compensated unfairly. Make sure everyone understands how a compensation package was calculated and reassure them it’s in line with their peers.
#7. Impact on Your Organization
Arguably the biggest x-factor in determining the right salary offer is the potential impact a candidate will have on your company. At the most basic level, how great is your need to fill this role? If you’re losing $10,000 each month that the position is vacant, it may be worth increasing a salary offer to get someone in your doors and productive sooner rather than later.
Similarly, are you hiring someone you want to groom into a leadership capacity? Do you see qualities in a candidate that indicate they might go above and beyond the responsibilities of the role at hand? If so, these signs can once again raise salary offers so you can lock down the rare transformational talent sitting across the interview desk.
Determining the Right Salary Offer
Every business is unique, and so are the candidates ready to fill open roles. The right compensation for one individual may be very different from another. While there’s no exact science, using the above seven factors as a guide will help you determine an appropriate salary offer. This will set the stage for an engaging conversation, increasing the likelihood of bringing an exceptional person onto your team at the right price.
Take the guesswork out of compensation and download your free 2020 South Florida IT Salary Guide today.