In part 1 of this article, we outlined why new employee salaries should take competitive pay information into account and about how setting a competitive salary level is a tool to reflect and help meet organizational goals. Now, let’s take a look at where to get data on what your competitors are paying.
 |
To find the data, you have a lot of options:
- Buy a commercial market pay survey. These are usually conducted by companies like Mercer or Hay Group, and they are often completed at the national or regional level and can be purchased. (This is not an endorsement of those companies; those are simply examples.) The upside to this approach is it is simple—there’s no work required to get the information. But the downside is that these reports can often be expensive.
- Talk to other companies and recruiters or recruiting agencies to find out average pay for different positions.
- Conduct new employee surveys on a regular basis. Ask them for their salary at their last position, and compare it to similar positions in your workforce. Use the information they provide to get a picture of the competitive salaries on offer.
- Use the government’s Bureau of Labor Statistics (BLS) data.
- Use the same resources that potential new employees will be using, such as websites that offer competitive salary information for a specified job title and location like Salary.com, PayScale.com, or Glassdoor.com. (This is not an endorsement of those sites; they are simply examples.)
- Review other job postings in your area to see if any list salary information.
- Conduct your own semiformal market survey. On a local level, you could even replicate what the big-name organizations do. Clearly this takes a lot of time and effort but would be likely to yield highly-targeted and accurate local data.
Once you have the data, you’ll want to update it to suit your needs. For example, you may have a report that has data for an entire region, and you’ll want to translate the figures into appropriate numbers for different parts of the region, such as large cities versus rural areas, which may have widely differing average pay rates to compensate for differences in the cost of living. You can also update the salaries as necessary to reflect cost-of-living changes in the time since the data were gathered, if applicable.
Also remember: This market salary determination is just one aspect to consider. Both internal and external benchmarks should be taken into account when setting pay rates. They should be compared to the internal organizational structure and pay rates of related roles throughout the organization to ensure that they are fair and consistent. (Market pay information should also be used to determine whether your existing employees are at risk for turnover if the pay levels are not keeping up with the market.)
Offering a competitive salary can help your organization recruit and hire the right talent, which can be an advantage in terms of better productivity and innovation. To keep securing the best talent for your organization’s goals, keep updating and assessing competitive market salaries periodically (every 1–3 years) to ensure you’re keeping at the optimum levels to reach your goals.