One of the top reasons companies fail to recruit top talent is compensation. You get what you pay for. This is just as true in recruiting as it is in any other industry. And no, you can’t get a Tesla candidate on a Datsun budget. The nature of the modern economy and candidate expectations no longer make it feasible to lowball candidates and expect them to accept your offer. It just doesn’t happen nearly as much anymore. Top talent know their worth and they know they have options. With Canada’s Job Market Looking Up, the market for talent will only become more competitive.
However, in my 7+ years of experience as a recruiter, many companies are still late to the dance, even when it comes to executive search in Toronto. Employers still think they can offer lower salaries and get great talent. I’ve noticed this explicitly in the sales and financial industries in particular.
Below I’ll discuss:
- Why senior leaders need to adjust their views on compensation budgeting
- Why salaries haven’t increased with inflation
- The costs of lowballing candidates
Why Do Senior Leaders Need To Adjust Their View On Employee Salary Budgeting?
The cost of everything in the economy has increased. We are reminded of this every day when we go to the grocery store, get gas for the car or when we look at our mortgage rates. The overall cost of living has increased significantly, especially over the past few years.
However, the one thing that has failed to go up significantly is your salary. It’s the one thing that tends to lag. Salaries today still fail to keep up with inflation.
Why haven’t salaries increased along with inflation?
I believe one of the main reasons for compensation misalignment is senior leaders, in sales and finance in particular. They are the people who are tasked with creating the P & L statements and budgeting for the year.
The issue is they are looking at these things in a vacuum and assessing things strictly from a financial perspective. Sure the finances and budgets look good on paper, but it doesn’t work in practice.
The numbers are no longer realistic. The salaries they paid in the past are no longer relevant to today’s marketplace. This puts the organization in a position where they are forced to search for a Tesla, at a Datsun price.
Some companies are paying the same salary as they did 20 years ago
For example, I’ve personally seen companies offering intermediate sales positions starting at $55K-$65K per year. The problem? Many experienced sales professionals in B2B sales roles were making this much 20 years ago, myself included.
There are even companies that are lowering compensation rates. They are offering a lower salary than what they were offering 6 months ago. These are the same companies that continue to struggle to fill open positions and attract top talent. As I said before, you will only get what you are willing to pay for. And at these low compensation rates, the only thing that you’ll attract are additional recruiting challenges.
Minimum wage increases as a comparison to salary increases
If minimum wage has gone up drastically in the last 20 years, why are base salary amounts hovering at such low rates?
I think a minimum wage comparison, in the retail sector is a good barometer to compare salaries. When you look at the percentage increase of the minimum wage in retail, vs. B2B corporate job salary increases, for example, the percentage is barely inching forward and pales in comparison.
Let’s look at the numbers:
- Minimum Wage: Based on Government of Canada data, the minimum wage in Ontario was $7.15 in 2004. Today it’s $16.55. The minimum wage has more than doubled over the past 20 years. It’s a 131% increase.
- Corporate salaries: According to Statistics Canada, the average salary for Canadians in 2000 was $56,200. As of 2022, the average salary was $68,000. This is a 21% increase.
The numbers clearly show that salary increases for corporate roles are significantly lagging. If companies want to attract better talent, they’ll need to increase their compensation offers or continue to face the costs of lowballing candidates.
What Are The Costs of Lowballing Candidates?
When you lowball candidates, you are often forced to hire someone who is adequate or meets the minimum standards for the role. This can lead to hiring mistakes and more turnover. Here are the main costs of lowballing candidates:
- Repeating the hiring process again and again – the continual cycle of hire, employee exits, recruiting and hiring again
- Losing top candidates once you get to the salary conversations
- The cost of hiring mediocre candidates – lower productivity and lower overall qualify of work
- Lower overall employee morale – people lack motivation when they don’t feel like they are being paid fairly.
- You hurt your employer’s brand – you’ll develop a reputation for not paying well. This will cause top talent to avoid applying for jobs with your company
- Less innovation and creativity
A Final Word On Candidate Compensation
Money matters and you get what you pay for. In an era where people know their worth, they are not going to take a salary that is not in alignment with their experience.
Even though you may not agree or want to increase salary numbers, you have to do it to compete in your industry. Benefits and perks are important, but not as a replacement for a competitive salary. So, do your research, and know what the industry average is for the jobs you want to fill. When you offer a competitive salary, you’ll attract the type of talent that can make a difference for your company.
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