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Salary Surveys                                          Home      Rewards & Compensation

A salary survey is a useful management tool. It can greatly simplify an organization's human resource management. By comparing a company's salary structure to its employment market, the business can be sure it is not under- or over-paying its employees. The internal equity of the company's jobs is clarified when their external parity is measured. Timely surveys keep the organization's salary structure up-to-date and competitive. An effective salary survey simplifies a company's human resource management.

Tunes Salary with External Trends

The organization should ensure that it is not paying more than the market demands for talent. By the same token, the company should avoid paying salaries that are appreciably lower than its markets. If the business scrimps on salaries, needed talent will be taken by those companies paying competitive salaries.

Clarifies Internal Parity Issues

Completing a salary survey provides data that clarify how particular jobs, and subsequently the entire salary structure, compares with the market. These data are vital to making salary administration decisions. Surveys help establish the relationship of positions (internal equity) within an organization. Once a survey is completed, the company can decide the degree to which salary levels should be adjusted; or whether they should be adjusted at all.

Keeps Pace with Market Dynamics

Employment markets change too quickly to allow too much time to pass between compensation reviews. If the company waits too long to compare itself to its markets, it may require too much money to "catch up" to the market. The organization's expenditures should keep pace with the market. As a general rule, two years should not pass without a thorough salary survey. Regular surveys will provide the data needed by the organization to keep its salary structure current...and, therefore, competitive.

Optimises HR effort

Consistently comparing the company's salary structure to its markets is an effective strategy; ensuring limited resources are appropriately applied to recruiting and retaining worker talent. Regular salary surveys can:

Basic Steps

Completing a useful salary survey requires several steps:

  1. Identify benchmark jobs and survey participants.
  2. Develop the survey questionnaire including brief descriptions of benchmark jobs.
  3. Mail the survey instrument to survey participants.
  4. Follow-up with participants via mail and telephone.
  5. Statistically analyze the survey results and adjust the compensation system as necessary.

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 Compensation Policy                                       Home      Rewards & Compensation

Compensation Policy

Compensation needs to address two issues:

internal equity

external parity

Job Evaluations or similar approaches are needed to determine the former

Market Surveys are needed to determine the latter

A continual effort to adjust the internal equity and external parity is needed as jobs change and people grow, and the as the market reacts to competitive pressures

Market Surveys

The market midpoint for each range is based on salary surveys. An annual review of the company's salary structure should include taking the organization's most-market-comparable jobs and identifying what the market is paying for similar work. Consider using enough surveys each year to collect local, regional, and national data. These survey data can then be used to calculate the company's range midpoints. Each year the company should make a determination, based on these market data, whether the entire salary structure (all of the structure midpoints) should be raised or lowered. This "structure adjustment" is influenced by such things as inflation and the demand for certain skills in the market. Admittedly, using surveys is not a perfect method for determining midpoints, because your organization's jobs are probably unique. However, using market information is a process that can get you close to market-competitive salaries.

Job Analysis and Evaluation

Jobs can be placed in a grade by some sort of evaluation system. This process applies several different dimensions, each with a point value, to each job utilized by the organization. The dimensions can include: education and experience required by the job, the level of supervision over the job, guidelines required to complete the work, the position's complexity, the job's scope and its effect on other work, contacts required by the job, the purpose of those contacts, the physical environment of the position, its physical requirements, and its human resource management responsibilities. This is by no means an exhaustive list, but an example of various job evaluation criteria.

After a position description is written, the job evaluation process is used to identify the job's total points. Total points then translate to a grade in the salary structure. A job's description and it's evaluation should be reviewed when functional responsibilities change.

Performance and Rewards Management

The company's performance management process should provide a goal-driven basis upon which merit increases will be awarded. At the completion of each performance year an Increment Matrix should be published. This matrix can outline the baseline merit amounts available to employees in each performance category. Such a matrix can tie merit pay to job performance.

Promotions

Effort should be made to ensure no internal equity problems are caused by promotions. Four guidelines should be applied when considering promoting an employee: the employee's work performance; his/her time in jobs doing related work; his/her current and planned compa-ratios; and the skills and experience he/she brings to the new position.

Market Ranges and Midpoint

The very first step in managing salaries involves developing and maintaining competitive salary ranges. Each range consists of a minimum, midpoint, and maximum salary amount. The midpoint represents the market competitive salary for each grade. (In other words, if your salary is at or near midpoint, your pay is market-competitive.) Minimums and maximums are calculated from each range's midpoint.

Comparison-Ratios

Comparison-Ratio is used to describe an employee's proximity to midpoint. Comparison-Ratio is calculated by dividing one's salary by the range midpoint. Comparison-Ratio is expressed in whole numbers. For example, let's say your job is in a grade which has a midpoint of 40,000. If your salary is 36,000, your Comparison-Ratio is 90. If your salary is 40,000 your Comparison-Ratio is 100. Since midpoint (Comparison-Ratio 100) is market competitive, an organization should attempt to move employees toward midpoint as they gain the complete set of skills for their jobs. You should recognize that a considerable amount of effort is required to minimize any inequities so that company Comparison-Ratio are at appropriate levels.