Salary Compensation is Most Accurate When You Survey the Right Labor Market

by on June 19, 2009 · 0 Comment POSTED IN: HR Info Center

Salary Compensation Varies Depending On The Labor Market

The labor market is generally broader than most companies define it. And most companies define their labor market really based on the products or services that they sell. That could be accurate, but in most cases it’s not exactly accurate for determining salary compensation.

You’re looking for a competitive market for the people that you attract and retain. And that maybe different from the products or services that list of competitors that you have. For example, if you were in Boulder, Colorado you may have a company that you compete against in Pennsylvania and you try to apply salary compensation information from Pennsylvania based on a survey to your own organization. This is not going to do you much good.

Now, in addition to surveying the right group of companies to figure out salary compensation, you also have to consider geography. And geography makes a big difference. You may have around the country as much as a 30% or 35% differential in pay ranges. And that differential is actually greater for the lowest paying jobs.

It’s been said that we compete for CEOs on a national basis and that they are generally paid the same around the country. In fact, there are geographical differentials even for CEOs. The Economic Research Institute shows that CEO salary compensation actually comes together on a national basis where there’s actually no geographical differential at the $3 million level. There are geographical differentials for virtually every job. And you should just be aware of that.

One of the other things that you have to consider here too is the size of the organization. Now, for most jobs within your company it’s probably not going to matter what the size is. An HR Rep in a small company is probably the same if you defined your job correctly. But when you move into the manager and above ranks, size makes a big difference. The level of salary compensation really depends on how much responsibility you have in the market. Generally define that in terms of the size of the company. The other thing to consider is your industry segment. Now, you will probably have a lot of jobs that depends on your company. You will have a certain number of jobs that will not differ on industry. For example, an Admin Assistant can actually cross industry segments. Some IT people, financial people, and even the HR people can actually cross fairly easily from one industry segment to another.

You should choose the right survey. Every survey has weaknesses, every one of them. They may not do one of these things we’ve talked about very well. They may not have the right geographical breakdown for your organization. They may not have the right size breakdown. So everyone has some weaknesses. That’s not to say that you shouldn’t use them, only that you should be aware of what the data is and what it represents.

Edited Remarks From “The 7 Deadly Sins Of Employee Compensation Plans (And How To Fix Them)” by Rick Olivieri

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