Today’s post is written by Terry Henley of Employers Resource Association.

Salary surveys offer a wealth of insight and information for organizations of all sizes and types and in all stages of the business cycle. If you are new to using salary surveys or do not fully understand the benefits of using survey data, here are a few tips to get maximum benefit from their use.

Make relevant comparisons. The primary reason to use salary surveys is to validate whether or not you are paying too much or too little for your employees, for their particular position, compared against your job market for the same positions. Your comparative job market would be defined as your specific industry, your geographic location, and companies/organizations of your size.

Compensation Benchmarking Study
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For lower-level entry positions, your geographic location and broad labor market may be sufficient. For instance, a General Clerk is paid similarly across industries.  However, the more specialized the position is to your industry, the more critical it is to compare data with positions in the same industry (e.g., Engineering, Education, Banking) or at least broad industry category (e.g., manufacturing vs. non-manufacturing, profit vs. non-profit).

The size of your organization also is important, for “deep pocket” companies sometimes have more budget flexibility, and geographic location is important because of the significant
variances in pay from one location to another, or for industries within a location. For instance, the oil industry market in Texas is different than the oil industry elsewhere. Note, however, that these differences may change drastically when a major industry enters or exits a market area.

Know the source of your data. It is crucial to making relevant comparisons. Organizations who are members of Employers Resource Association know that our survey data is broad in scope and is broken down by geographical area, industry groupings, and company size.

If you use industry-specific surveys (such as Accounting, Legal, Engineering, etc.), you need to research whether the data comes from companies that are good comparisons with your company. For instance, you may subscribe to an Engineering survey that provides excellent industry-specific data, but a review of their survey participants indicates that 50 percent of the companies surveyed are in California or New York, which is not a good salary comparison for you. Or you may discover that the majority of companies in the survey are companies of $500,000,000+ in revenue, compared with your revenues of $20,000,000 – again, not a valid comparison.

You could find that there is a very small sampling of companies in the survey base, opening up the possibility of data being skewed heavily by data from one or two survey participants. Also, if you are in a non-profit organization, you need to be certain whether you want to compare against databases that are heavily weighted with for-profit companies, and vice versa.

Terry Henley is the Director of Compensation Services at ERA. He has more than 35 years of management, consulting and executive experience in human resources. His primary focus at ERA is establishing pay and performance management systems for member organizations.

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