Base Salaries as competitive advantage

Many organizations believe, the base salaries are the part of their competitive advantage. The base salaries are not a good tool to build a competitive advantage on the job market. The organization will the salary level, which is not compliant with the overall business strategy makes the organization generally weak to compete with others.

The base salaries can be used as a competitive advantage, when the organization meets special situations:

• Entering new business area
• Rapid Growth
• Urgent need for new skills and competencies

When the organization decides about the new business development or entering new business area, it usually needs to buy the experienced employees on the job market and it has to pay “risk premium” to them. The base salaries are usually competitive just for a limited period of time as the founders of the new business area are pushed to leave the organization as they are expensive.

The organizations with the rapid growth have to pay the premium as they have no time to build internal career paths and they need new employees quickly. They have no chance to wait for the right cheap job candidate as every day without the new employee is a huge loss in profits. These companies offer the competitive base salary for a limited period of time, the new comers after the era of the rapid growth are paid with the base salary fully in line with the job market.

The organizations in troubles urgently need people to help. As the job candidates know about the situation, they usually ask for the premium and the organization has to pay more than median market level salary as the employees have more power in the negotiations about the salary.

The base salary should not be used as the competitive advantage, when the organization has no clear argument for the payment of higher salaries than the common market level.