Compensation is one of the most misunderstood aspects of hiring. Pay too little, and you’ll struggle to attract top talent. Pay too much, and you might overinflate costs or bring in someone whose expectations don’t align with your company’s reality.

Finding the right balance isn’t about simply matching market rates—it’s about understanding what you need, what candidates value, and what actually drives long-term retention. Here’s how to assess the right salary and package for your next hire without overpaying or underdelivering.

1. Start With the Business Need, Not the Market Rate

Many companies start salary discussions by checking salary benchmarks or looking at competitors. While market data is useful, it shouldn’t be the first step. Before looking outward, get clear on what this role needs to achieve for your business.

• Define the impact of the role. What measurable outcomes should this person deliver in their first 6-12 months?

• Assess the role’s complexity. Does it require a deep specialist, a generalist, or a leadership mindset?

• Determine the real value. What’s the financial impact of hiring the right person? If this role can generate revenue, cut costs, or increase efficiency, that should factor into compensation.

If you only base pay on what other companies offer, you might end up paying for experience rather than outcomes.

2. Benchmark Smartly—But Don’t Copy the Market

Once you’ve defined what success looks like, use market data to validate and refine your compensation range, not dictate it.

• Look at similar roles in companies of your size and industry. Large corporates can afford bigger salaries and perks that smaller businesses can’t—so don’t compare apples to oranges.

• Use multiple sources. Salary surveys, job postings, and industry reports provide useful reference points, but they aren’t always accurate.

• Factor in location, demand, and competition. If you’re hiring in a talent-short market, you may need to offer more, but overpaying just to compete is a short-term fix.

A strategic salary range should be competitive but sustainable, ensuring you attract great candidates without bloating your payroll.

3. Build a Compensation Package—Not Just a Salary

Salary alone isn’t what attracts or retains top talent. The entire package—including perks, benefits, flexibility, and career growth—matters just as much.

• Base salary: Needs to be fair, aligned with the role’s impact, and within your budget.

• Bonus & incentives: If the role drives business outcomes, consider performance-based pay rather than a higher fixed salary.

• Equity or profit-sharing: A good option for startups or growth-stage companies that can’t match big salaries but want employees invested in the company’s success.

• Non-monetary perks: Flexible work, additional leave, training budgets, or unique company benefits can be just as valuable as extra salary.

The best employees don’t just chase the highest salary—they look for roles that offer real value, growth, and rewards that go beyond money.

4. Avoid Paying for Experience Over Impact

One of the most common hiring mistakes? Assuming that a higher salary automatically means better performance.

• A candidate’s past salary doesn’t determine their value in your business. Just because they earned $180K in a big corporate doesn’t mean they need the same in a smaller company.

• Experience doesn’t always equal effectiveness. Someone with 15 years in an industry might be less adaptable than someone with 5 years in a fast-moving role.

• Hire based on what they’ll deliver, not what they earned before. A top performer in a growing company can be worth more than a mid-level manager in a big-name firm.

Salary should reflect the impact a candidate will make in your business—not just their years of experience or job history.

5. Be Transparent and Have a Clear Negotiation Strategy

Compensation should never feel like a guessing game. The best candidates appreciate clarity, so your approach to salary discussions should be upfront and structured.

• Set expectations early. Avoid vague statements like “salary depends on experience.” If you have a range, share it.

• Don’t lowball. Offering less than a candidate is worth creates a bad first impression and increases the risk of them leaving early.

• Know where you can flex. If salary is non-negotiable, be clear on other areas (e.g., bonuses, benefits, flexibility) where you can offer value.

Being transparent builds trust—and helps you attract the right candidates without endless back-and-forth negotiations.

The Right Pay Attracts the Right People

Hiring the best talent isn’t about paying the most—it’s about offering a fair, competitive package that aligns with business needs and candidate expectations.

By focusing on impact over experience, structuring a full compensation package, and being transparent from the start, you’ll attract and retain high performers without overpaying or undervaluing the role.

Because the right hire, at the right pay, is always worth the investment.