Making Sense of Salary Survey Data

Whether you’re overseeing a not-for-profit or a for-profit organization, salary surveys will help establish competitive pay levels. Many factors go into compiling and analyzing salary-survey data, such as cost-of-living and geographic comparisons.

Salary surveys can help employers accomplish a number of objectives: from evaluating a current position’s pay competitiveness (for instance, if someone believes they’re being unpaid) to the development of an entire compensation structure for the company. Employers commonly use salary-survey information as an aid or tool for:  

• developing pay grades for new positions;
• guiding managers in making salary offers or calculating performance pay; and
• forecasting and budgeting purposes.

What mistakes can employers avoid? Certainly employers want to avoid making costly business mistakes, especially in areas relating to employee compensation.

1. First of all, it is important that employers accurately match the salary-survey benchmarks with the position duties. If this step is not properly handled, the consequences can be significant. For example, if you are using an outdated job description, you may end up with salary ranges that are either too high or too low for the position you are benchmarking.  This can create long-term problems to a company’s pay structure and ultimately impact recruiting, retention, and employee morale. Instead, employers should strive to match approximately 70 to 80 percent of the job content from the position’s job description to that contained within the salary-survey job summary. 
2. Using the survey information as an absolute standard is another commonly made mistake.  Salary-survey information should be used as a guideline; not as the final say-so when deciding upon how much to pay people. Survey information is fairly dynamic. Therefore, the information gleaned from the survey is better used as a snapshot of job-pricing practices for the geographic market you have surveyed.
3. Misusing or misapplying salary-survey information is another mistake employers want to avoid. This can happen when companies haven’t clearly defined the reason(s) for needing the information. Employers should also take care to identify their compensation philosophy and the value of the position to the organization, including their ability to financially support changes to pay ranges.

Additional Considerations
Employers need to review internal and external business-environmental factors such as supply and demand for labor. A business should also consider its industry’s financial standing and the region’s cost-of-living factors. If these factors are ignored, the data can be significantly misinterpreted. Even though all factors carry different weights, they all should be considered when analyzing salary data in order to form the entire picture.

Looking Ahead
In a future Insight, I will review the steps that employers can take when preparing to maximize the benefits of using salary-survey information. Meanwhile, the following resources for gathering salary-survey information are available online:

Bureau of Labor Statistics
This government agency has salary survey data for many different positions in various industries, as well as specific geographical locations.

Abbott, Langer & Associates
Abbott, Langer Association Surveys (ALAS) and ERI Salary Surveys provide salary and benefits survey reports to subscribers. ALAS has long focused on the nonprofit and manufacturing sectors.

Salary surveys help establish competitive pay levels. Many factors can affect salary survey data such as geographic and cost-of-living comparisons.