Base Salaries and Competitors

The managers believe, the employees leave the organization, because the competitor offers to them a higher base salary. Honestly, the employees are usually satisfied with their base salaries, they are not satisfied with their managers.

The base salaries are always driven by the competition on the job market. The organizations compete for the talents on the job market and their base salaries have to be competitive. The organizations monitor the job market and they adjust their base salaries according the job market.

The organization, which is stable, tries to set its base salaries around the median of the job market. When the market salaries are not exactly known, the managers have to use their gut feeling to set the base salaries correctly.

The competitors tend to pay similar base salaries to their employees. When the organization pays a higher base salaries at the same job position, there is always some kind of the issue. The organization in troubles has to pay “a risk premium” to its employees as it needs urgently to solve its issue. The employees should be always warned, when they leave the organization for a better salary.

The base salaries are the part of the competition on the job market and some organization makes the base salary their competitive advantage. Generally, this approach is very dangerous as the organization has to pay a higher proportion of its costs in personnel expenses and it can bring a huge disadvantage in the future.