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A competitive salary ensures that a worker is paid at market rates on a job. Several criteria are taken into consideration when mentioning a competitive salary. Criteria include what workers in the same company do, cost of living adjustments, cost of workers in related industries, hours worked, and mandatory training requirements.
A competitive salary is comparable to what workers in the same company do. This is measured by standard criteria, such as length of service, performance metrics such as sales, and responsibility in the company. It also includes other types of incentives such as performance bonuses and commissions if other workers who perform similar jobs in the company receive them.
Cost of living
Cost of living adjustments affect competitive salary calculations. Rural areas typically cost much less than renting or owning property in cities or suburbs, and wages in this regard. Large employers, including the federal government, adjust their pay scales according to where a worker is assigned. The cost of living is also affected by regulations like state income and property taxes, as well as the cost of air conditioning and heating, which can be substantial.
The cost of workers in related industries is also a factor. Some workers, such as sales experts or managers, know a general skill set, which is useful for many companies. The prestige of an industry also affects compensation. Research jobs at a university can pay less than a job in related manufacturing. Nonprofit employees pay less because staff are receiving benefits from making a difference in the world. According to the University of California-Santa Barbara, salaries in market-based pay structures are compared to jobs with similar functions at other companies.
A salaried worker is paid by the week rather than by the hour. Salaried jobs generally include more flexibility for this, including required hours per week. Some managers of salaried jobs expect their workers to work 100 hours a week, others expect 40 hours or less. Hours worked affect competitive pay, because a higher weekly wage in a company can provide lower hourly earnings if employers expect an employee to work longer hours.
Training requirements affect a competitive salary. Many jobs require continuing professional education, which requires the employee to take additional courses each year to remain qualified for the position. If a company offers paid training, the employee does not have to pay for the courses, so this is part of a competitive salary.