Analyzing Salary Surveys

Additional Information

Additional information for compensation surveys may also include:

• number of incumbents in each job
• minimums and maximums of the salary range
• degree of match
• actual low salary
• actual high salary
• average/median base salary
• short-term incentives or bonus eligibility at target
• total cash compensation
• long-term incentives
• total direct compensation
• premiums
• shift differentials
• lead differentials
• union status
• exemption status
• education level typically required for the position
• certifications typically required

Take a look at these categories and find out which are important for your survey requirements.

A Word About Pay Rates

The primary information contained in compensation surveys is pay data for specific benchmark jobs.

Typically, base pay rates are used in compensation surveys, exclusive of any shift differentials, overtime, bonuses, or other types of variable pay. Clear definitions should be presented. Base pay should always be requested on a gross basis, meaning prior to any deductions for taxes or employee benefits.

When base pay is reported in compensation surveys, it is exclusive of shift differentials, overtime, bonuses, or other types of variable pay. Clear definitions should be presented. Base pay should always be requested on a gross basis, meaning prior to any deductions for taxes or employee benefits.

Base pay rates, or base salary, must also be reported to a common time period. For example, a survey may request base salary rates on an hourly, weekly, monthly, or annual basis, and this should be clearly defined. The number of incumbents in each job is usually requested as well as average base salary. Actual minimum and actual maximum rates of pay may also be requested. Many surveys request compensation data by employee number and can be readily downloaded from the human resources system to the survey input document.

If other components of pay such as shift differentials, bonuses, etc. are requested in the survey, specific definitions should be provided. For example:

• Hiring rates - should reflect the starting pay rate for the job.
• Second shift differential - a differential paid to employees working a shift between 2:00 pm and 10:00 pm (Note: second shift may vary by organization).
• Minimum of pay range - the minimum pay rate for a grade or job.

Surveys will also collect data on total cash compensation which includes short-term incentives such as bonuses, annual incentive plans, and commissions. Surveys also may report on long-term incentives such as equity compensation (e.g., non-qualified stock options and full-valued shares). Total direct compensation typically reflects the sum of total cash compensation and long-term incentive compensation.

A Brief Word on Benefit Surveys

Benefit surveys are usually conducted separately from compensation surveys. The information sought is quite detailed and usually applies to all employees or broad employee groups. The purpose is usually to determine the prevalence of benefits and benefit practices, rather than costs, but some benefit surveys attempt to obtain the latter as well. Different individuals or different departments may be responsible for benefits and compensation so one person may not be able to submit data on both. Benefit strategies and the competitive marketplace very often differ from compensation and should be carefully reviewed.

A Brief Word on Cost-of-Living Surveys

Cost-of-living surveys are numerous although they most often are collected for reasons other than compensation. Relocation, international assignments, housing sales activities, advertising for local areas via Chambers of Commerce and a host of other objectives spawn thousands of surveys. Many surveys cover just one aspect of costs, such as transportation (gasoline, insurance, new auto costs, etc.). Taken together and analyzed, these surveys produce information useful in setting per diems, paying relocation allowances, temporary housing, rents, and calculating other one-time adjustments.

Cost of living is rarely used in setting salary levels. One example of when cost-of-living data may be needed is an engineering firm that sends engineers throughout the country on three-month assignments. In this case, the firm pays a salary equivalent to the going rate at their headquarters city, and then pays an allowance for the host location based upon that area's cost of living. Churches also utilize cost of living in setting their salary levels, oftentimes adjusting for the changing housing costs of relocating ministers.