When it comes to job descriptions and recruiting candidates, just about nothing has become more taboo than the phrase “competitive compensation.” These two little words have become a crucial signal to prospective employees, and not the good kind.
The phrase “competitive compensation” typically appears when an employer lists pay on a job posting or discusses it during recruiting. This phrase is used instead of specific salary figures. While the intention behind using “competitive compensation” might be noble, and its origins are sincere, today, these two words can repel prospective employees - especially regarding startup hiring.
So, why has the phrase “competitive compensation” become so damaging, and how should employers actually tackle compensation?
The short answer is that prospective employees are more attracted to pay transparency during the recruitment and hiring process, and the phrase “competitive compensation” is anything but that. Especially in the fast-moving startup world, prospective employees want to know what they can expect as far as pay, and they want to be compensated fairly for their work.
Here’s everything you need to know about “competitive compensation” and what you should consider doing instead.
Why do employers say “competitive compensation,” and what does it really mean? Competitive pay refers to compensation that is on par (or better) with the industry standard for that role but is sometimes used for different purposes.
When compensation is listed as “competitive,” it typically means that the salary will depend on the experience and skills of the employee. It also indicates the range of pay that a company will pay for this role.
Companies can use the phrase “competitive pay” for various reasons. They might not want to list their salaries upfront to encourage employees with different experiences and backgrounds to apply for the role, for example. It might also be that this is just how a company has “always done things,” and they consider it standard practice (disclosing salaries has long been seen as impolite, but this view is rapidly changing).
Whatever the reason, the phrase “competitive pay” is no longer effective at drawing in employees. In fact, today, this phrase can often dissuade employees from applying for positions and might not convey the intended message.
Let’s get down to brass tax: What truly is competitive compensation, and what does that phrase actually translate to? Competitive compensation refers to pay and benefits comparable to or better than what other companies will pay for that position. It refers to the “industry standard” of compensation, including all benefits and perks.
It’s common for competitive compensation to include salary and overall benefits. This might be referred to as a “competitive benefits package” in a job description and usually provides health, dental, and vision insurance. It can also include child care, a fitness membership or stipend, and other healthcare services, such as mental health resources.
While the phrase “competitive benefits package” might include more benefits and perks than just the salary itself, it might also be just as alarming to prospective employees as the phrase “competitive compensation.”
The phrase “competitive pay” might sound just fine and might refer to pay that is indeed up to par with what is fair and expected for the position. So why doesn’t it cut it anymore, and why can it be so problematic for prospective employees?
The biggest problem with the phrase “competitive pay” is that it doesn’t provide pay transparency - which is what prospective employees are interested in. More and more, candidates are demanding pay transparency from their potential employers. Data shows that it impacts “employees’ perceptions of trust and fairness, and job satisfaction.”
Some of the biggest benefits of pay transparency go far beyond encouraging better performance from individual employees. There are rampant pay gaps in the workforce - including racial and gender pay gaps (in 2022, women still earn 77 cents for every 1 dollar a man earns). Pay transparency is a viable solution for closing those gaps.
It’s not just private companies that are shifting the way they approach discussing compensation: Lawmakers are starting to get on board. The Governor of New York just signed a new pay transparency bill into law, which mandates that salary ranges be posted for all advertised jobs. Other states already have similar laws, while others require employers to disclose pay upon request.
It’s clear that gatekeeping salaries are ineffective across the board. For employees, it can deter them from applying for jobs they might be an excellent fit for and give them the “wrong idea” about a company. They might think that a company is unwilling to offer them “competitive compensation” and that they’re more likely to get the short end of the stick.
For employers, using the phrase “competitive compensation” can severely limit their applicant pool for positions and prevent their dream candidates from applying. It also might encourage candidates to apply who have different salary expectations, leading to confusing and muddled negotiations.
It’s clear: When writing job descriptions and recruiting candidates, saying that we’re offering “competitive compensation” is out. So, what can we say about salaries instead? Generally, it’s best to operate from a lens of pay transparency.
This means that written job descriptions should include a specific salary range or detail what organizations are willing to pay someone with varying experience levels for the position. Along with the salary range, you can clarify what skills your organization finds most valuable and what experience would lead to different pay levels.
Also, when conducting interviews or recruiting candidates, it’s important to discuss salary figures early in the process to ensure everyone is aligned on what the pay might look like. This allows prospective employees to state their salary expectations and employers to share their proposed salary for the position so that everyone is on the same page. Not only does this lead to smoother hiring processes, but it also ensures that there are no surprise situations at the end of the recruitment process.
Don’t forget: There’s a lot more that goes into attractive compensation than salary alone. Studies have found that 80% of employees would choose more benefits over additional cash in their paychecks. So, when you’re writing job descriptions or discussing compensation during recruitment, plenty of other benefits are worth promoting and discussing.
Sure, employees are drawn to great healthcare, excellent dental coverage, and wellness stipends. But today, employees also deeply value flexible work schedules, remote work opportunities, reimbursements for home offices or healthcare resources (like workout equipment), and meal allowances. Many employees are also drawn to childcare benefits, assistance with eldercare, mental health services, and educational assistance.
Employers can get creative with their benefits. Many benefits, from yoga programs to stock options, can bolster a compensation package and showcase how an employer values its employees far beyond salary. All of these benefits should also be listed along with the salary ranges.
The verdict is in: Talking about pay in terms of “competitive compensation” just isn’t going to cut it. In fact, it’s far more likely to prevent excellent candidates from applying to your fast-growing startup and prevent you from hiring executives who can help take your company to the next level.
The truth is that certain phrasing deeply matters to applicants and influences those interested in positions with your company and those who aren’t. And when it comes to attracting your dream applicants, many other factors draw them in besides how you talk about compensation.
When you’re ready to bring on your next great executive leader, we’re here to help. We’re Will Reed, the only go-to-market search firm built exclusively for early-stage founders, and we’re experts at recruiting perfect-match leaders.
Our executive recruiting services don’t only involve assembling the best team and tapping into our deep talent networks: We help you establish excellent infrastructure in order to run a best-in-class interview process at scale and ensure you’re equipped to navigate conversations around salary.