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STATISTICS FOR COMPENSATION: PART 1

The purpose of statistics in compensation is to provide mathematical tools to objectively identify and describe how much jobs are worth and how to pay employees in the context of organizational goals. Compensation professionals are tasked with making a business case for a recommendation to change pay or pay program by analyzing the underlying assumptions, pulling data from the right source, and preparing concise conclusions for the management team.

WageWatch reports its data in several ways. The Benchmark report is a fast and easy way to report on national, regional, state, and city market cuts of data. The PeerMark report is our advanced tool that allows the survey subscriber to build custom competitive sets at a granular or niche market level.

When analyzing data from either report, there are many analytic tools to choose from and it can be overwhelming for those preparing a compensation project for the first time. A straightforward and highly effective statistic to use to describe a situation and develop a solution is to use percent (%). In basic terms, a percent is a measure of relative value.

The percentage forms the basis of the WageWatch reports. Percent is used in many places in the survey in several different applications.

  1. Percent Difference – The most common application of percent is its use in describing the difference between two numbers. The percent difference can be used to compare how wages change year over year as well as the difference between external to internal rates. There are two ways to describe differences using percent.

For example, your average rate of pay for a select service hotel Front Desk Manager is $45,000 per year and the market average rate is $55,000. It is easy to calculate that you pay $10,000 less per year on average for this job. It can be expressed as a percent two ways.

  1. You pay 18.2% less than the market average

i.     ($45,000-$55,000)/ $55,000 * 100 = -18.2 or 18.2% less

  1. The market average is 22.2% more than your rate.

i.      ($55,000-$45,000) / $45,000 *100 = 22.2%

Both calculations are correct, so which to use? You could use both. “Our Front Desk Manager is 18.2% below market average. We need to raise our rate by 22.2% percent to match market average.” You can avoid having to explain the figures by restating this conclusion as “Our Front Desk Manager is 18.2% below market average. We need to raise our rate by $10,000 to match market average”.

  1. Percent Position – The percent position is used to state your overall market position relative to the competition in the data set. WageWatch allows subscribers to build custom reports by including a target percentile statistic that ranges from 11% to 89%. Percentile is a position that a given percentage of the data is less than or equal too. For example, if your target percentile is 60th, than that is a market position where 60% of the competitors are less than or equal to and 40% are greater than or equal to.
  2. Percent as Ratio – A percent is a ratio multiplied by 100. We can see this when looking at dashboard metrics such as Turnover Rates. If a company fills one front desk agent position out of ten for the year, then the turnover rate can be expressed as 1:10 or 10%.

For these reasons, it is critical that compensation and HR professional understand how to use percent to communicate the story behind the data in a simple way. Please contact WageWatch if you need assistance with interpretation the statistics reported, help building custom reports, or have a need for our wide range of consulting services. For more information on our services and surveys please call WageWatch at 888-330-9243 or contact us online .

This entry was posted on Tuesday, August 19th, 2014 at 12:21 PM and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.