Understanding the fundamentals of salary surveys is an important part of managing compensation at your organization. Salary surveys are your primary and best source for setting pay rates. Paying your employees fairly and competitively is good business. Paying below the market can lead to employee turnover and paying above the market can negatively impact revenue. Companies pay for salary survey compensation data because the benefits far exceed the cost as it is a fraction of a percent compared to total payroll cost. Additionally utilizing third party survey vendors such as WageWatch, that comply with all DOJ safe harbor guidelines can protect your organization from anti-trust violations.
Select the right survey for your organization. The wrong survey source can lead to higher or lower data, so always look at the participant list and demographics and other measures of relevance to your industry such as revenue, size and business segment. While government data can be a reliable resource for salary benchmarking, the data is often found to be conservative when compared to other compensation data sources due to the time frame it is captured, and the types of organizations surveyed. Salary data found for free on the internet is not only indefensible but since sources cannot be verified, the data is found to be highly inaccurate. These sources generally do not publish participant names, demographics, effective dates of data, and sample sizes. Data published by recruiting firms and individual employee data (such as from job boards) also tend to be unreliable and report inflated pay rates.
Understanding your market and knowing where you lose employees to and where you recruit from is key to selecting the best competitive set for your organization. For example, your hourly staff may be recruited from local competitors while your management staff may be recruited from all over the U.S. The best salary data will be from companies with similar geographic focus. When your recruiting pool is local, ideally your salary comparisons will come from other organizations in the same city or town. However if the data is unavailable, good salary comparisons can come from a different city or town with similar labor market characteristics and a similar cost of living. When salary survey data is unavailable for a local market, compensation professionals will often use regional or national cuts of data and apply the cost of wage factor for the specific locality to those results. This is a common practice among compensation professionals and the data results are relevant and reliable.
Another critical factor is sample size. To remain anti-trust compliant, there must be at least 5 companies matching to a position to yield any results. And generally eight to ten participating companies is considered a good sample size for positions below the management level. Ideally the sample size should increase the more senior the positions being surveyed, since each company organization structure will differ.
Take the time to read the defined terms provided by the survey to ensure a correct understanding. This is important both for reporting your data and correctly interpreting the survey results. Read the survey job descriptions and ensure you have an accurate understanding of your organizations’ jobs, so that you correctly match to the survey jobs. Never match solely by title. A survey job description will normally list the primary job function in a couple sentences, followed by key responsibilities. The descriptions are generic but should contain enough information for participants to appropriately match. It is also important to match the organizational level of the positions be surveyed. For example a Rooms Manager may be the number two position at one organization and may be the top Rooms executive at another and this would clearly not be a match.
To correctly interpret the survey data results, pay attention to exempt status, if the pay is reported as hourly or annual etc., union/non-union status and the effective date of the data. Decide whether aging the data is appropriate based on the effective date of the data and the average percent increase that is anticipated. Along with the actual pay data, surveys often include salary range information. You should include the salary range information in your analysis of results.
As for the data statistics, the median pay is widely considered to be ‘at market’. The range of pay reported differs for various reasons such as pay philosophy; incumbent’s length of service or proficiency in the job. Looking at your organization’s current pay point for a position as compared to the survey pay median along with the range of pay reported in percentiles as well as the salary range (minimum, mid-point and maximum) data will help you make an educated decision regarding where to set your pay structure. Also ensure that you look at incentive/bonus and other forms of compensation that are reported in the survey and include this in your analysis.
Taking the time to understand the survey jobs, data fields and results will go a long way in helping you set competitive and appropriate pay levels for your organization and positions. Today’s world moves fast, and as an employer you should constantly be monitoring and adjusting your business operations to meet the ever changing wants and needs of your employees. At WageWatch, we offer accurate, up-to-date benefit survey data, market compensation data and salary reports that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. For more information on our services, including market compensation data, benefit survey data and salary reports, please call WageWatch at 888-330-9243 or contact us online.