What does competitive pay mean?

Competitive pay refers to when employers offer potential hires compensation, in the form of salary or wages, that is comparable to other employers in the same industry. Competitive pay is also often referred to as competitive compensation and competitive salary. In addition to money, competitive pay can also include specific employee benefits.

Companies attract the best talent and retain them by offering competitive pay. This also shows a company cares for its employees when they offer great salaries, excellent employee benefits, and other perks. Employers determine competitive pay rates by looking at what other employers are paying for similar roles.

Many employers offer health insurance plans and retirement plans, but companies can also offer these creative benefits as competitive pay:

• Gym memberships

• Wellness programs

• Profit-sharing

• Stock options

• Performance-based bonuses and other bonuses and incentives

• Free food or snacks

• Free professional development courses or counseling

Organizations that have comprehensive competitive compensation packages keep their employees happy and have no problem finding new talent.

Competitive pay is also a form of strategic compensation. Strategic compensation is a term that refers to the financial compensation, employee benefits, and incentives a company offers its employees to maximize employee retention and commitment to the company's goals and objectives.

HR departments often employ strategic compensation packages that include competitive pay to attract and retain top-tier talent. This helps companies to develop compensation packages that position them well in the job market of specific industries. Strategic compensation often includes competitive pay, which often contains these elements:

• High salaries for employees

• Comprehensive employee benefits (Insurance and retirement plans, etc.)

• Forms of variable compensation

Variable compensation is a form of payment from employers to employees that is based on employee performance. Normally, variable compensation is paid in addition to base compensation, like an annual salary or hourly wage.

Variable compensation is often included in strategic compensation packages. It is used by employers to incentivize their employees into performing their jobs better or at a higher level of output. This might apply to sales quotas for instance. If a sales team is able to reach or exceed a sales goal they might receive variable compensation in the form of bonuses.

Variable compensation can come in several forms, including:

• Bonuses

• Commissions

• Incentives

• Stock options

• Profit-sharing plans

Within some of these areas there are also other subsets of variable compensation, like variable compensation for bonuses:

• Retention bonus

• Project-based bonus

• Referral bonus

• Sign-on bonus

And variable compensation or incentives: