18 Jan Compensation Planning Tips: How to Perform a Salary Survey Analysis to Gauge External Competitiveness
Collecting data from market surveys in a critical step in any compensation planning process, but it’s how you use the data that’s most important. Here, we’ll go through some tips to help ensure you’re using market data to your fullest advantage.
How to Perform a Salary Survey Analysis
After you’ve gathered salary data from at least three to four surveys, you can then begin to design salary ranges. Develop grades or groupings and then establish ranges around pay points. The spread can be as small as 45% or as large as 120% Group similar jobs together based on how they’re paid in the marketplace. Note the degree of overlap between each range.
Next, draw a line through all of the mid-points of the salary ranges. This will give you a good idea as to where you should be paying. From there, you can adjust your pay structure accordingly. Keep in mind that your approach can’t be static; it must be dynamic. The goal is to ensure that as employees are promoted, they won’t fall out of pay ranges.
While market data is an excellent source to help companies achieve equitable pay, there are also other considerations to bear in mind. For instance, you may need to reconcile some differences between the internal value of certain positions and what the marketplace says they’re worth. Most organizations have certain in-demand jobs, which tend to drive pay higher. Additionally, always factor in general business conditions, such as unemployment and turnover rates. Finally, be mindful of internal issues, such as pay compression. If talent is being brought in from the outside at higher pay rates than some long-term employees who perform similar work, it’s important to take these types of issues into account when looking at your pay structure.
Ultimately, there will always be internal issues to factor into your pay decisions. The most effective way to avoid pay gaps and pay competitively is to look at compensation from both an internal and external standpoint.
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