On paper, offering below-market salaries can seem like a smart way to reduce hiring costs. In reality, however, underpaying candidates often leads to higher expenses and greater challenges down the line.
Recently, a client was searching for a Team Lead in Private Equity, a role that required both leadership experience and niche technical expertise. After an extensive search, we found the ideal candidate: someone with proven experience managing teams, thriving under pressure in both local and international markets, and meeting every technical requirement.
When it came to the offer, however, the budget sat well below market expectations – R41,028 less per year, or just less than R3,419 per month. Despite our guidance on market trends, the client chose to hold to their original budget.
Within days, the candidate accepted another offer.
Four months later, that role is still unfilled. During this time, deadlines were missed, team morale dipped, and productivity slowed. The hours spent interviewing, the operational strain, and the cost of lost output far outweighed the “savings” of a reduced salary.
But what if the candidate had accepted?
Even if the candidate had agreed to join at a lower salary, the risks wouldn’t have disappeared. Offering below market rate sets the tone for the working relationship and increases the likelihood that the employee will remain open to other opportunities. After onboarding, training, and integrating into the team, the candidate may still be lured away by a company offering fair compensation and leaving the business back at square one, having invested time and resources into a short-term solution.
The bigger picture
Hiring is about more than just filling a vacancy at the lowest possible cost. It’s about securing the right talent, ensuring stability, and building long-term relationships. Saving a small amount each month can seem appealing, but the hidden costs (from lost productivity to increased staff turnover) can be far greater.
When it comes to compensation, it’s worth asking:
- Is the short-term saving worth the operational and financial risk of not securing the right person?
- Or does it make more sense to adjust budgets in line with market realities and invest in a hire who can deliver value from day one?
At Acuity, we’ve seen time and time again that paying market rate is not just about attracting top talent, it’s about keeping them too.