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Competitive Pay: What Does It Mean?
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Competitive Pay: What Does It Mean?

Job hunting terminologies might not always be easy to grasp. Anyone who has spent time browsing employment adverts will notice a recurring phrase. That is, "competitive pay" or "competitive salary."

Employers may attract and retain outstanding talent in their organisations by providing competitive salaries. Understanding what makes a pay rate competitive will aid you in the job search, application, and negotiation stages.

While the phrase may tempt those looking to boost their earning potential, it is not always clear what they signify or involve.

Offering competitive remuneration appears to be a significant component of a company's hunt for individuals who can best help them achieve their objectives. Companies usually offer competitive pay to attract qualified workers in a competitive job market.

If you're looking for a job or considering a career change, you'll want to know how to evaluate and take advantage of competitive pay packages.

The phrase "competitive pay" is designed to indicate a good income, but it could also be a trojan horse.

In this article, we analyse competitive pay, how companies use the phrase and the factors that drive it. 

What is Competitive Pay?

Competitive pay is defined as a pay structure or package that is equal to or more than market rates for a certain job, in a specific industry or geographic location.

The term "competitive" denotes that the organisation competes for top-tier applicants by offering competitive wage packages. It may also imply that a corporation is willing to negotiate pay in order to retain the smartest candidates.

Many individuals are unaware that competitive pay entails more than just a higher beginning salary. Competitive pay means also delivering an adequate benefits package to employees.

More paid leave, flexible work schedules, more comprehensive retirement plans, professional progression chances, high bonuses or commission, better health insurance policies, and so on are all part of a competitive benefits package.

Why Do Businesses Use  “Competitive Pay?”

For starters, not establishing a figure allows for negotiation with prospective candidates. Pay is routinely negotiated by companies based on the candidate's expertise, talents, and personal contribution to the firm.

When negotiating a salary both the prospective employee and employee gain feedback from each other. As a result, the employer-employee relationship can begin on a positive note. Employees will feel empowered knowing that their employer cares about their goals and needs and is willing to accommodate them if they are not unreasonable.

Second, pay information is frequently withheld. This could be because of the company's privacy policies. As a result, omitting the precise wage out of a job advertisement keeps salary information private and between the employer and the prospective new recruit.

Furthermore, many businesses would be able to determine which applicants are there only for the money and those that are there because they are competent for the position and actually want to work for the company. 

They can tell who is enthusiastic about the role rather than just the appealing income and compensation package when they do not provide a precise salary amount.

What are the Determinants of Competitive Pay?

Salary fluctuates greatly depending on your profession's circumstances, such as industry and geography. Some of the determinants of what would be considered ‘competitive’ pay include; 

  1. Years of Experience and Level of Education

It should go without stating that the more knowledge, education/training, and experience a candidate has, the more income they may anticipate making. As a result, most companies base their remuneration on this.

The range of duties one can perform, as well as whether a role is an entry-level or a mid-tier, are all determined by one's experience level, and this typically influences how competitive the person's compensation will be.

For example, entry-level jobs that require little experience may pay less than mid-level jobs that require several years of experience.

  1. Location

The regular market rates of a job are also determined by the location of the organisation. This is common in areas where living costs are greater; hence, the minimum salary and compensation may be higher to cover the additional costs.

The cost of living, which is a major factor in deciding salary, is mostly dictated by location and, in particular, the cost of housing. This explains, at least in part, why salaries in large cities are frequently higher than salaries in more rural areas for comparable jobs.

  1. Job Availability

When there is labour scarcity, pay in a high-demand position is most likely to be competitive. On the flip side, when there are many skilled persons angling for the same position, the net effect is the lowering of the position's market pricing. Generally, if the skill sought is readily available in the market, the compensation will typically be lower. 

  1. Industry

Employees with comparable or even the same job title can expect significantly varying compensation depending on the industry. There are several explanations for this disparity: their area of work may be critical to a single industry, or one industry may simply be significantly larger than the others.

A 2019 Kenya National Bureau of Statistics report shows that international NGOs and the financial services sector had the highest-paying jobs while agriculture, real estate and manufacturing sectors paid the least. 

What’s in a Competitive Pay Package?

Competitive pay encompasses the entire compensation package, not just the salary. Here are some of the benefits that come with a competitive salary package.

  1. Health Insurance

One common component of a pay package is health insurance, which is usually offered in varying degrees depending on whether you work full-time or part-time. 

Medical, dental care and vision insurance are among the most sought-after job perks, so it's no surprise that better health insurance is a prized component of competitive pay.

  1. Paid Leave

This is an essential component of any competitive salary package. Time away from work is essential for your health and wellness, as well as if something changes in your personal life or if you become unwell. Leaves are also a great way to minimise burnout at work. 

You can maintain your performance and work toward your personal and professional objectives if you can balance your life and work, so if a company offers paid leave as part of its compensation package, that's a win for you.

  1. Retirement Options

Many companies include retirement plans in their benefits package. Depending on your employer and preferences, you can begin saving for retirement by placing a portion of your income into a pension account. 

When your employer matches a portion of your contributions, it's a terrific way to make the most of your savings, and this is a pay advantage that should not be overlooked.

While a typical pay package often includes a salary, paid time off, health insurance, and retirement benefits, these aren't the only options available to you. Other significant benefits include:

  • Bonuses and/or commissions.
  • Paid parental leave.
  • Options for working from home
  • Schedule flexibility
  • Insurance for people with disability
  • Life insurance
  • Tuition reimbursement
  • Commute reimbursement
  • Meals, a gym, childcare, etc.


You can now become excited whenever you come across the phrase "competitive pay" during your job search now that you know what it means. Remember that competitiveness changes according to the market prices and your qualifications among others.

Even if your job search does not yield your dream salary, believe in your abilities and use these tactics to negotiate the best possible compensation package. Whether you receive a signing bonus, more vacation days, or that much-needed pay raise, you and your budget will be delighted with your achievement.

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Sheila Brenda Andoi is a dedicated journalist, meticulous editor, and skilled communicator with a profound passion for maternal health. Her journey in the world of media and communication has been marked by a commitment to shedding light on crucial issues. Sheila's writing not only informs but also inspires and educates

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