Salary Administration centers on what's happening in all of the labor markets

by on June 25, 2009 · 0 Comment POSTED IN: HR Info Center

Keep track of how competitors handle their salary administration

The next step in determining salary administration is called market-pricing. It’s a fancy word of saying – the fancy way of saying benchmarking. In other words, we’re going to look at evaluation for jobs in the external labor market. What do other organizations pay for similar duties and responsibilities to what we have in our organization.

Key considerations when conducting benchmarking in salary administration.

The first is location. The question is, do we want to look in the local labor market? Do we want to broaden that and look regionally or maybe, we even look nationally in scope?

Part of that decision is going to be dictated by the salary administration survey data that we have available to us. This question is critical and should be answered based on, where do you attract employees from, and where do you potentially lose them to?

In most organizations, for a lower level position, a file clerk for example, we would tend to recruit people exclusively from the local labor market. You probably won’t conduct a national search for that lower level position. And generally speaking, you’re going to lose people to the local labor market.

At the opposite end of the spectrum, if it’s a CEO or another executive position, you’ll conduct a national search. In other words, your CEO or executive will be looking at opportunities all across the country if they’re considering leaving.

But by the same token, if we’re looking to hire one of those roles, we’re going to be looking for the best and the brightest in the country and entice them to move to our location, typically. It’s a long way of saying that you want to match the salary administration data to our recruiting retention patterns.

Industry is also another salary administration consideration.

Some jobs are found across the broad spectrum of employers. Jobs such as IT, finance and accounting can be found in school districts, in healthcare and manufacturing, consulting, professional services, even still find some of the jobs at GM and Chrysler.

However, most organizations in most industries have some positions that are specific or unique to that industry. In healthcare for example, you would find a lot of RNs. You don’t typically, find RNs outside of healthcare. Teachers in education, there are number of industry specific jobs that you need to think about when determining salary administration.

The point is that when we’re looking at some of those industry-specific jobs, we should be focused exclusively within our industry. However, if we’re looking at one of those broader positions, an HR position for example, don’t think myopically just at your industry.

The size of organization.
Typically, there is a strong correlation between size of organization and compensation exclusively in various senior level management positions.

So, if you’re talking about the CEO and the direct reports to the CEO, typically maybe in a very large organization, one level below that, it turns to be a strong correlation to compensation. In other words, the CEO of a billion dollar organization is going to tend to have a higher compensation on a CEO from a hundred million dollar company.

However, the receptionist at a billion dollar company is not typically going to be paid more. They’re just going to hire more receptionists at the billion dollar company than they do at the hundred million dollar organization.

So, these three considerations for salary administration would be location, industry and size of organization.

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