Offering the right salary is a key factor in attracting employees during recruitment. With a well-defined salary structure, it’s clear what the company considers reasonable pay for different jobs. This helps managers offer the right salary to candidates.
Clear internal guidelines also make HR’s work easier, since HR often provides advice and support to managers when setting salaries. Because salary levels are affected by a job’s responsibilities, complexity, and market value, the salary structure also provides solid arguments for salary discussions during recruitment.
This article explains how companies determine the right salary when recruiting for new or existing jobs.
A Salary Structure That Helps You Set the Right Salary
A salary structure helps HR and managers understand what is reasonable for different jobs. It provides a shared foundation for the organization and serves as a practical guide in both recruitment and salary discussions.
When developing a salary structure, start by evaluating the different jobs within the company. Based on this evaluation – the relative weight or importance of each job – you can group several jobs into broader categories if needed.
Key factors that should influence pay include responsibilities, complexity, and authority. Employees who can influence their salary in similar ways and compete in the same labor market can belong to the same group.
Setting the Right Salary Within the Range
Once jobs are grouped, it’s time to define suitable salary ranges. To do this, consider factors such as:
- Market salaries for comparable jobs.
- The company’s existing salary levels.
- The company’s financial situation.
You should also check the company’s internal pay policy to ensure consistency.
The salary range for a given job shows what is considered reasonable. Often, the range spans from 80–120% of the market median for that job. The employee’s competence and experience determine their position within the salary range.
When the Right Salary is at the Lower End
For new hires, the salary often falls at the lower end of the salary range. The employee is expected to learn internal systems and procedures, and to build experience within the job before fully meeting expectations. It’s common practice to allow time for this learning process before higher performance – and pay – are expected.
When the Right Salary Is Near the Median
If the candidate already has the experience and knowledge required to perform the job as expected, their salary should be closer to the middle of the range.
When the Right Salary is at the Upper End
It’s uncommon to offer salaries at the top of the range for new hires, though exceptions exist – for instance, when the candidate has rare or highly sought-after skills.
However, offering a salary at the upper end may limit future salary growth, which can affect motivation. In such cases, it’s wise to discuss career development opportunities or potential new jobs within the company to ensure long-term engagement.
Market Salary and Its Impact on Recruitment
Setting the right salary is never simple. One key factor is the market salary for the job. For example, if you’re recruiting a project manager for an IT consulting firm, you need to consider both the general market salary for a project manager and the salary levels specific to your industry.
External salary data helps you benchmark – compare pay levels for similar jobs at similar companies. For hard-to-fill positions, market salary information can be crucial to successfully attracting the right talent.
Salary Setting for New Jobs
Recruiting for a brand-new job can be especially challenging since there’s no internal salary data to rely on. In these cases, you must base decisions on external data while keeping the company’s overall pay structure and financial position in mind.
When Employees Apply for a New Job Internally
An employee who moves to a new job within the company rarely ends up at a much different salary level compared to an external hire. However, internal recruitment brings other advantages.
The same principles apply to internal and external recruitment, but you can use the employee’s current salary as a reference point for the new offer.
When an employee moves from an individual contributor job to a managerial job, a salary increase is natural. If the move is horizontal, you need to consider both market data and internal pay levels within the team. Even if the new job requires slightly lower qualifications, salary reductions are rare –though future increases may be limited for a period.
Why Setting the Right Salary Matters
Salary setting is often one of the most difficult tasks for managers. HR plays a key role in supporting and guiding them through the process. Since many companies use individual pay as a motivator to attract and retain talent, having clear, structured processes makes a real difference.
Beyond salary, the company can offer other incentives, such as extra vacation days, bonuses, or additional benefits. Recruitment is costly, so setting the right salary from the start – while allowing for growth over time – is essential to attracting and retaining employees.
