How do you know if you are paying your employees competitively? Is your company’s ability to attract and retain employees influenced by your pay ranges? Organizations looking to find wage and salary data have a lot of choices but the multitude of these choices can be overwhelming. Before even considering what to look for, management must think strategically about the talent they wish to attract and retain in today’s difficult labor market.
I asked an expert in this field, Lee Weisiger, co-founder of the Titan Group and a certified compensation professional, for some advice about where to find solid reliable compensation data. He indicated that there are three key steps in this process:
1. Determine your peer group, market for talent and where the people you want to hire work
2. Where would you like your pay positioned against the market (lag, meet, lead)
3. Get reliable salary data
Weisiger indicated that the first step in this process is to determine the peer group or market for talent. For most organizations, the definition of market may be much different for executives than for lower paid positions. Next, company executives must determine where they would like their pay positioned against the market. Some organizations peg the median or average, but often, a level above average can be selected, such as the 75th percentile. Once these steps are complete, the next step in the process is to obtain salary data from reliable sources.
Salary data can be found in several forms, both published and online — some require a subscription fee. There are some sites on the Internet that promote salary data, but many of these are not entirely useful. If the site does not indicate where the data was collected or does not describe the methodology for collection, watch out! The more reliable sources are published and can be obtained from associations or third-party consulting firms. Weisiger recommends that you try to find at least three sources for comparison. Using multiple sources reduces the variance of data, and more sources should include enough jobs that match up with your organization to make the purchase of the survey justified. The sources also must match up well with your market definition including industry, geographic and size breakdown. Another option is to conduct your own survey, but this takes time and it is difficult to gain participation from competitors without an objective third-party consulting firm.
Once the sources have been determined, selected and obtained, the hard work begins. Time should be taken to match the duties and experience required with the job descriptions provided with the survey source. A common rule of thumb for matching jobs is when your job matches at least 65 percent to 75 percent of the survey job description. If the job is not a perfect match, you can also use an adjustment factor, usually 5 percent to 15 percent, to adjust for the match with your job. Finally, the data should be “aged” to a common date for purposes of comparing multiple sources. An adjustment factor for salary increase trends is used to bring all published data to a common date for purposes of developing a consensus market value for each job.
The final step is to take all the data and adjustments and compare the market data to your organization’s salary and range data. Once completed, this analysis forms the basis of making pay and range adjustments.
Genevieve Roberts is managing principal at Titan Group LLC in Richmond. She can be reached at .Tweet