Navigating New Hire Wages: 3 Tips for a Comprehensive Compensation Strategy
While factors such as engagement, work/life balance and advancement opportunities all play a role in employee satisfaction, organizations can't afford to ignore wages. Here's are three tips to help your business create a competitive compensation strategy.
New workers would rather be unemployed than unhappy.
According to data from the ADP Research Institute Employee Sentiment Survey, 46% of workers ages 18 to 26 would rather have no job than be unhappy in their work.
This begs the question: What makes workers happy? While factors such as engagement, work/life balance and advancement opportunities all play a role, organizations can't afford to ignore the obvious: wages.
"By approaching compensation discussions openly and with a clear understanding of market trends, businesses can establish themselves as employers of choice in a competitive hiring landscape."
— Chris Mullen, VP of workplace insights and transformation, ADP
Here are three tips to help your business create a competitive compensation strategy for new hires.
Tip #1: Talk about wages up front
On average, organizations now take nearly 40 days to fill available roles. From sorting through resumes to scheduling interviews and carrying out due diligence, this process is a significant time investment.
As a result, it's critical to discuss wages up front. Consider a top-tier candidate at the final stage of the recruitment process. They're offered a contract, but the compensation doesn't match their expectations. The business doesn't have room to budge, and suddenly, a month and a half of work is wasted.
To avoid this issue, be clear about compensation up front. This could mean posting the expected salary in the job description or communicating it to prospective staff at their first interview. Put simply, sooner is better.
Bonus tip: Consider using AI to speed up the selection process by helping to write job descriptions or review submitted resumes. As noted by ADP's 2025 HR Trends Report, 63% of businesses with 1,000 or more employees now use AI.
Tip #2: Track state and local compensation changes
Your compensation strategy also needs to account for differing state and local expectations.
For example, the minimum wage varies significantly across states and within state jurisdictions. Consider Arizona. While the state's minimum wage is $14.35 per hour, the minimum wage in Flagstaff is $17.40. In states like Kansas, Kentucky and Louisiana, the minimum wage is $7.25. As a result, employee expectations will vary by location. While offering $18.00 per hour in Tucson, Arizona, is significantly above average, it's just 60 cents over the minimum in Flagstaff.
According to the September 2024 issue of Today at Work (TAW), smaller-scale trends within urban areas can also impact compensation. The TAW piece considers several metro areas, including Denver-Aurora Lakewood in Colorado and Seattle-Tacoma-Bellevue in Washington.
In the Denver area, median annual pay grew 5.8% over the last year, and median pay for new hires was $19 per hour. The top industries were construction, manufacturing, and professional services. In Seattle-Tacoma-Bellevue, the median pay for new hires hit $20 per hour, with manufacturing, education and health services topping the new hire charts.
For businesses looking to hire and keep new talent, the message is simple: There's no one-size-fits-all approach to compensation. Employee expectations are impacted by multiple factors, including local minimum wages, median pay in their area and industries that are looking to fill positions ASAP.
Bonus tip: Keep an eye on overtime. The U.S. Department of Labor recently raised the salary threshold for overtime exemptions under the Fair Labor Standards Act (FLSA), and some states are considering the removal of tax on overtime pay.
"Tax and pay are becoming important issues for employers who have employees working in multiple states. It's essential to stay on top of laws for payroll, withholdings and reporting."
— Tim Morris, legal compliance director, ADP national accounts services, ADP
Tip #3: Take transparency seriously
Pay transparency is now a national priority. Between 2023 and 2024, 17 states and Washington D.C. passed transparency laws. Cities and counties are also following suit, with some requiring employers to disclose realistic salary changes.
Taking transparency seriously offers two benefits for employees and employers. The first is reducing pay gaps — in the United States, women make 16% less than men on average, with larger gaps for women of color. Transparency promotes fairness, which, in turn, can improve talent acquisition and retention.
Transparency also improves trust. If employees are free to talk about wages and compensation data is easily accessible, they're better able to advocate for themselves and their financial needs, in turn increasing their trust in organizational priorities.
"Understanding your pay data and benchmarking pay can help you monitor pay equity issues and market competitiveness. Communicating effectively about those issues can improve your relationship with employees and build trust."
— Meryl Gutterman, senior counsel, ADP
Bonus tip: Granular compensation benchmarking can improve recruitment efforts. Wages may vary according to industry, geographic location, job titles, and skills required — the more specific your benchmarking, the more accurate your compensation model.
Staying the course: Creating a consistent compensation strategy
To help streamline the process of hiring new staff, the right compensation strategy is key. To create an effective strategy, three components are critical: Stating salaries up-front, tracking local and state wages, and keeping transparency top-of-mind.
But these strategies aren't static. To ensure your compensation stays current, regular re-evaluation is essential. Schedule quarterly or bi-yearly reviews to examine new data, incorporate key changes, and keep compensation competitive.
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