Salary Competitiveness Ratio (SCR)

If you’ve worked in a company for years on end, you probably realized that people want better salaries not on account of them being materialistic, but because the costs of living seem to be on an endless upward trend.

As a business owner, raising salaries might be out of the question, simply because you can’t afford to pay people more than you already do. This, however, doesn’t stop them from leaving your company for better jobs.

Business is an extremely competitive domain, so you shouldn’t be surprised if a company starts courting your best employees. What can you do in this case? Well, let’s explore the Salary Competitiveness Ratio or SCR for short.

What is the SCR?

The Salary Competitiveness Ratio is the figure you get by dividing the average salary your company is currently offering by the average salary paid by one of your competitors. You’ll see that this figure is most of the times not that huge, but people tend to leave anyway because it’s still a step forward.

Okay, now, what good can come out of knowing the SCR if you can’t still afford to pay people the salaries they want? The first thing that should spring in your mind is a compromise.

You can do the math in order to see how big of a raise you can give your employees without bleeding out financially. There has to be some room for it, despite your financial difficulties.

Your employees – while they surely won’t stick around forever – will at least appreciate your effort. Now let’s put you in the situation where you have the funds at the ready. In this case, you can destroy your competition with one single blow by paying your employees more than they would be paid if they worked there.

It’s a bold move and it might well require a ton of sacrifices, but it will pay up in the end. Sacrifices, there’s probably no need to even mention this – are essential in business and those aimed at keeping your employees shouldn’t make you think twice.

Again, the world is not necessarily made up of materialistic people – it’s just that there seems to be no end to things becoming more expensive and salaries staying the same. Chances are that your competitors will step up their game and raise their employees’ salaries, as well, but it won’t be as easy.

Bottom Line

Knowing the SCR is a great tool you can use to keep people in your company. It gives you a sense of why your employees are unhappy and what exactly they are looking for. Everybody can just ask “So, how much are you going to be paid there?”, but that’s not much of a Salary Competitiveness Ratio.

If you’re losing your best employees left and right, assess what the SCR between you and the competitor is. This way, you’ll see whether you can keep those employees in your company or not by offering them as much money as the other companies.