Are you in the position of having many jobs available and nobody around to fill them? You're not alone. With a large number of companies competing for a small talent pool, hiring managers need to make sure that the compensation packages they offer will be strong enough to lure the talent crop their way. This cutthroat scenario begs the question: what kind of compensation packages are top candidates looking for?
The answer is surprisingly simple. To lure the best candidates, start with a generous base salary. Stock options, signing bonuses and benefits packages are nice, but if the base salary doesn't stand on its own, candidates will look elsewhere.
Back to the "Base"ics
Flaunt a higher-than-average base salary, and candidates will come running. Why? In a strong economy, the cost of living is high. Employees want to cover expenses first, and to do so they want high base salaries. Mary Marshall, a recent hire at a Manhattan-based PR firm, says that a high base salary was the most important factor in narrowing down her job offers. "I had to set a target base salary. Once my offers met that, then I could look at the other parts of the compensation packages," says Marshall. With so much attention paid to the base salary, hiring managers need to make sure that this part of the compensation package remains competitive with industry standards.
While significant increases in the base salary would appear to put a strain on corporate finances, the strategy may actually save the company money. There is so much cost in turnover that employers don't consider. Keeping employees happy, through high base salaries and other means, will lead to low turnover, which saves the employer a large amount of money in the long run. With a little tweaking of their business strategy, employers may be able to offer a much higher base salary than they imagined, enabling them to attract and retain top candidates.
Bonuses, Bonuses, Bonuses
While a high base salary is the most fundamental aspect of a winning compensation package, bonuses can sweeten the deal significantly. In industries such as investment banking, annual bonuses are an expected part of the compensation package, usually increasing in value with the length of employment. Steven Song, a first-year analyst at a financial services firm, explained the importance of bonuses in the compensation package. "I understand that the salary is not going to be that big; the bonus is the big thing. The base salary is just supposed to let you get by, living-wise. The bonus allows you to buy Christmas gifts, save money, and help pay off credit cards." Bonuses in the financial industry can range from 25% to 100% of the base salary, with much more possible for executives. When bonuses figure so heavily into the total compensation, candidates will ask around to get a sense of what bonus your company offers. Make sure that if the information is not spelled out in the offer the candidate has an accurate idea of what to expect. If your company's bonus is significantly lower than what's being handed out by other companies in your industry, you can be certain that candidates will find that out!
Never Underestimate the Power of Stock Options
While fallout from the spring NASDAQ "adjustment" has caused stock option packages to lose their luster, candidates in competitive markets still expect to see stock options in their benefits packages. Companies such as Cisco have taken some of the risk out of the stock options deal with their innovative stock purchase plan, which offers employees the opportunity to buy stock at 85% of the market price. Such plans encourage employees to invest in the company, breeding loyalty and a drive to see the company succeed. Stock options are also useful as a retention tool, as vesting periods may entice employees to stay on long enough to reap the benefits of the options.
In a well-rounded and attractive compensation package, benefits that contribute to quality of life are crucial. Marshall named "a good health insurance package" as one of her most important criteria in choosing a job, as important for her as a competitive base salary. With health-care costs escalating, candidates are less willing to accept a benefits package that skimps on health care coverage. Medical, vision, and dental insurance are all standard components of a benefits package for any company that hopes to land top candidates. Some companies, such as Southwest Airlines, win clients with their flexible health coverage plans, including reduced costs for spouses and children.
- See Is Good Communication More Important to Employees Than Better Benefits? for more information.
Perks: The Little Things That Make a Big Difference
One thing that Fortune's "100 Best Companies to Work For" have in common is unusual perks. From free ice cream in the summer to on-site child care (SAS Institute), perks can often make an otherwise average employer stand out from the crowd. The Container Store offers a hefty 40% merchandise discount to its employees. "It's our most popular and talked-about benefit," says a Container Store Human Resources representative, who notes that almost all employees were customers first.
For Marshall, the perks "make a difference. Perks say something about a company. They give an indication of what the atmosphere at work is going to be like." One of the perks at Marshall's new job is an in-house masseuse once per month. Says Marshall, "I don't even like massages, necessarily. But I like a company that makes friendly gestures toward its employees."
Not to Mention...
Other components of a compensation package that can be deal-makers or deal-breakers are vacation time, flexible hours, and office conditions. Are you offering your top candidate a small cubicle, while your chief competitor offers that same candidate a private office? Does your offer include one week of vacation in the first year, while others in your industry offer two weeks for new employees? These seemingly less-important components shouldn't be overlooked, especially for that all-important candidate. Keep in mind that these parts of the compensation package can be beefed up with little or no expense to the company, and consequently they are some of the best bargaining chips for employers.
The Big Picture
To attract top candidates, offer a compensation package that is well-rounded, fair and generous. Put yourself in your candidate's shoes to try to assess the offer. Would you take the job, if you were the candidate? If not, re-assess the offer to decide what its weak points are and strengthen them to the point where hot talent won't turn you down.