Employee Compensation Survey Data Isn't Always Accurate

by on June 26, 2009 · 0 Comment POSTED IN: HR Info Center

Do Yourself A Favor And Verify Employee Compensation Results

Some examples of unreliable employee compensation data are self-reported data. Most of the free websites or even the not free websites tend to rely on self-reported data. Some of them rely on a black box where they say, “Hey we use all the salary surveys but we’re not going to tell you how we use them.” Oftentimes they’re self-reported data.

The problem with that is that you can log on to one of those websites. And you can ask how much does a compensation consultant in St. Louis earn for example. They may say, “Okay, we’d be happy to share that number with you, but before we do, tell us how much you earn so we can incorporate that in to our employee compensation database.” You put your salary and bonus in there and they give you the result along with two pages of notes on how to beat up your boss to get a pay increase.

Well if you don’t like the results that they gave you, you can go back on to one of those sites and ask them the exact same question, how much does a compensation consultant in St. Louis earn? They’ll say, “How much do you make so we could incorporate that into our database?” Well now, you tell them you make $10 million a year. They’re going to incorporate that into their database and now you’re going to have a little bit higher result. You can drive that through self-reported results, you can drive the final answer that you want to. There’s very little quality control in terms of the actual employee compensation data being entered. Furthermore, there is little to no quality control in terms of the job matches that are being considered.

Another example is the Department of Labor’s data. Their data tends to be quite a bit on the low side. Their surveys are conducted every other year. They’re free of charge. You can find them on the Internet for free, but the data tend to be low. The quality tends to be very low.

Finally, oftentimes with HR department data is from one or two competitors. Managers and supervisors within your organization may hear about job offers that their employees get, about an adjustment that the competitor down the street got. It is critically important that you have reliable data driving your compensation decisions so that you can confirm that it is in line with what you see in the market. For all we know the information that we’re getting from down the street, they may be the highest payer in the market. By comparing to them, it would cause us to inflate our compensation structures. One philosophy, for example, is to be at the middle of the market and so you’re not just going to focus on one or two competitors because that doesn’t encapsulate the entire market.

Edited Remarks from “How to Set Pay Ranges That are Fair and Effective” by Edward Rataj

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