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HCMWorks Insights

How to Define the Right Pay Rate in Your Industry

Posted by HCM Works on 18 May 2021

Knowing the right pay rate for sought-after positions in your industry is an important part of remaining competitive. However, when hiring new talent or opening new positions, it can be hard to accurately define compensation. If employees or contract workers believe that their payment is below the industry average, it may cause them to be reluctant to accept the job or cause them to seek employment elsewhere. Thus, it is important for hiring managers to familiarize themselves and stay up-to-date on industry pay rates.

Pay rate, also called salary rate or compensation rate, is the amount paid to an individual or a position per period of time or unit of production. When pay rates are compared, this is known as wage or pay comparison. Pay rates may differ for contingent workers and permanent employees, as the latter may receive other benefits as part of their compensation packages.

Why Compare Wages?

Employees and job seekers compare salaries to ensure that they are adequately or competitively compensated for the service that they provide. Knowing the market value of skills and experience can help workers negotiate pay raises with their employers. Contingent workers with highly specialized skills may charge higher rates than permanent workers. When hiring through a staffing agency, there may also be additional third-party fees included in the pay rate.

On the other hand, Human Resource (HR) managers and talent acquisition teams can leverage pay rate comparisons to set employee salaries and payments for contractors. By doing so, companies can ensure that they are offering competitive compensation package or payments that are in line with the industry average.

Finding the Correct Pay Rate

There are numerous methods for finding and comparing pay rates for specific industries and positions. Certain job posting sites actually include salary or hourly wages. A simple search of different positions for hire can provide a fairly accurate comparison of what is currently available. In addition, some job sites provide averages for positions based on existing data. A reliable overview of industry average wages can be found through credible comparison sites. Some of these sites include the Bureau of Labor Statistics, Glassdoor, and Indeed, which enable the employee or hiring manager to search according to industry, position, experience, and/or location.

While some companies discourage or prohibit the sharing of salary figures, it is actually illegal to do so. The 1935 National Labor Relations Act (NLRA) protects the right of employees to share their income with colleagues. The NLRA encourages practices that are “fundamental to the friendly adjustment of industrial disputes arising out of differences as to wages, hours, or other working conditions, and by restoring equality of bargaining power between employers and employees” (National Labor Relations Board).

Setting Competitive Wages

Managing a hybrid workforce of contingent workers and permanent employees adds another level of complexity. Paying consultants or temporary workers with specialized skills more than your salaried workforce can lead to trust and morale issues. In addition, skills that may have been in demand in the past may now be more abundant. Therefore, it is important to regularly review your vendors and their rates to ensure that you are still paying a competitive rate.

Establishing a pay rate for a new position posting or negotiating with current employees can be a difficult process, especially when considering industry averages and budget. HCMWorks provides HR advisory and talent acquisition services based on cross-industry experience. Acting as an external partner, our team can provide your business with a comprehensive approach to talent sourcing and workforce management. Contact HCMWorks to learn more about how we can help unlock savings in your organization.

Tags: Workforce Management, Independent Contractors, Contingent Workforce

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