Why it’s time companies finally got rid of the term “competitive salary” and started being honest

In this op-ed, Virgile Raingeard, co-founder and CEO, Figures breaks down why the term "competitive salary" has become a red flag to job seekers and what can HR pros do to fix it.
Why it’s time companies finally got rid of the term “competitive salary” and started being honest

There are few phrases that have become as overused and clichéd on job descriptions as “competitive salary.” 

Employers throw the term around to entice potential employees. Hiring managers defend its use by claiming it levels the playing field. They claim it weeds out candidates who are only after pay and benefits or say they can’t be specific because it “depends on experience”. Yet for job seekers, it has become a major red flag.

It’s not difficult to see why. At best, it’s because the term is inherently vague. At worst, it can perpetuate pay disparities and inequalities in the workplace. 

Imagine wanting to buy a car and the dealership is not listing the price but only saying "our brand new model has a very competitive price" and revealing the price only at the end of the buying process. Or imagine going to visit a house not knowing the price it's for sale at? Why should candidates have to accept to go through the lengthy and often stressful application process for a role without knowing the end salary?

A quick Google search defines a competitive salary as one that is “equal to – or more than – the average for the industry for a similar position and location.” This raises more questions than it answers. What is the average? How was it calculated? When was the average value calculated? What are the factors that make a candidate worth more or less?

Such a lack of any concrete definition or standard makes it difficult for job seekers to gauge what they can realistically expect. It also leaves too much room for interpretation, allowing employers to offer salaries that may not actually be competitive in the market or industry and waste everyone’s time. Whether inadvertently, or deliberately. 

Elsewhere, research has consistently shown there are significant wage gaps based on gender, race, and disability. When employers use vague and subjective terms like "competitive salary," it allows such biases to creep in and potentially influence pay decisions. Often subconsciously. 

And once an employee has been hired off the back of a “competitive salary” position, they can find it difficult to negotiate pay rises in the future – or at least get a pay rise that is fair and representative. Without a clear benchmark to compare to, how can they push for the compensation they deserve?

Put yourself in the candidate’s shoes

Look at it from the view of the candidate. Say you’re browsing LinkedIn on your lunch break, you’re not actively looking for a new role but one appears that piques your interest. Without knowing anything about compensation, and aware that any interview process will take time and effort, the role is disregarded as a potential waste of time. 

Or you’re looking for a company with strong diversity and inclusion policies. You see an ideal role but, due to a lack of salary, you’re immediately put off over worries that the firm doesn’t value fairness or doesn’t have a pay structure in place.  

When you then factor in the cost of living crisis, the skills gap, rising inflation and a turbulent job market, the reasons for recruiting and job seeking are even more multifaceted than ever before. Neither side can, or should, be leaving anything to chance. 

And if this doesn’t persuade you, ask yourself this: would you accept a CV from someone who, when asked to describe themselves, simply wrote: “I have competitive skills and experience.” If the answer is no, why should candidates expect this from you?  

Opening Pandora’s box

The reason the term remains so overused is largely because the alternative, for most employers at least, is too scary to consider. It requires them being open and honest about pay and to be open and honest about pay it involves making their unstructured (and potentially biased) compensation process visible. 

When employers are hesitant to talk about salaries, it fails to promote transparent pay policies. Colleagues are less likely to discuss compensation and benefits with their peers out of fear of repercussions for violating company policies. 

Aside from creating a potentially toxic environment, it doesn’t encourage loyalty or productivity – the two cornerstones of a successful business.  

How to ditch “competitive salary” and be more honest

The first step towards transparency is diving into your current compensation approach. 

Look at pay inequity, in particular your gender pay gaps, and assess how your team currently makes compensation decisions. 

Typically this step can feel overwhelming but getting the support of your leadership, taking it step-by-step, and by dividing the work can prevent it becoming too much. 

The next step is to create salary bands. Creating robust salary bands takes time but it’s more than worth it in the long-term, not just for recruiting purposes. Salary bands have been shown to increase employee retention and engagement, create pay equity and make sure your salaries are actually competitive. So much so, a 2023 report from The Josh Bersin Co. found that among the 5% of companies with effective pay equity policies, they were 1.6 times more likely to meet or exceed financial targets, 2.1 times more likely to attract the talent they need and 1.7 times more likely to innovate effectively.

Plus, you may as well get started on this now, as the EU Pay Transparency Directive will begin to come into force next year, implying major impacts for companies with European workers. Under this directive, eligible companies will have to adopt pay transparency whether they like it or not. Many companies are getting started on their pay transparency journey and the adoption of pay transparency policies will become market practice before the law comes into effect. 

Money makes the world go round. It may not always be the key driver when looking for a job but it’s naive to believe that how people are compensated is not a key deciding factor. Make their decision easier and it will be easier for you to attract the very best talent. It’s a win-win.

Lead image: Scott Rodgerson

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