Looking to Benchmark Pay?
EMPLOYER WILLINGNESS TO PAY
Employer willingness to pay may be a more powerful salary determinant than employer ability to pay. This is based on:
- comparable salaries
- cost-of-living levels
- supply of particular skills
- tight or loose labor markets
Comparable Salaries
Organizations frequently obtain and use information on what other employers pay.
Without a doubt, comparable salaries constitute the most widely used salary determinant with 80% of organizations reporting they use market pricing.
Example: The salaries of federal employees are aligned directly to comparable salaries in labor markets. So are those of most public employees in other jurisdictions. Also, unions emphasize "coercive comparisons," and private organizations consciously try to keep up with changes in salaries.
Why are comparable salaries based on market-pay information so commonly used? The answer is apparent fairness and simplicity.
Apparent fairness
Perhaps the major reason for the widespread acceptance of the concept of comparable salaries is its apparent fairness.
Q: What does "fair pay" mean to most people?
A: To most people, an acceptable definition of a fair salary is the salaries paid by other employers for the same type of work.
Employers find this definition reasonable because it implies that their competitors are paying the same salaries. In essence then, labor costs become even across the industry.
Apparent simplicity
Another reason for the popularity of the comparable salaries concept is its apparent simplicity. At first glance, it appears quite simple to "pay the market."
This illusion of simplicity vanishes once we try to "determine the market rate":
- Precise techniques are required to find comparable jobs and comparable market rates.
- Numerous decisions must be made on which organizations and which jobs should be compared, and how.
- Equally important are decisions concerning how to analyze and use the data.
- Salary comparisons may involve other organizations in the area or industry, wherever located.
The going salary is an abstraction – the result of decisions defining what:
- jobs and organizations to include.
- salary information is appropriate.
- statistical methods to employ.
Some employers decide to pay on the high side of the market, others on the low side. The result? A range of rates, to which various statistical measures may be applied.
Various interpretations of the going rate may be made and justified.
Salary data source. ERI's Salary Assessor® (SA) can be used to gage an organization’s salary competitiveness. This program provides detailed pay range information for more than 16,500 positions and 9,000 locations in the U.S., Canada, and Europe.
| How to Retrieve Salary Data | |
|---|---|
| Step 1: | Open ERI's Salary Assessor (SA) application. Use the demo if you don't have a subscription - see the Instructions page for the demo. |
| Step 2: | Browse Job Titles. |
| Step 3: | This will open the Browse Jobs box. In the Search field, begin typing the name of the job you are researching. In this case, we will look up "Call Center Representative (General Calls)." (You can also scroll through the list and click to select a job title.) Once the position appears highlighted in the list, click OK. |
| Step 4: | The Salaries by Experience/Size module now displays data for this position. Adjust the data by area, industry, company size and salary planning date. |
| Step 5: | You may also adjust the data to the employee's performance level. If the employee performs below average, select Percentiles to make adjustments for performance. You can do the same if the employee performs above average. Here, you can also change the data from median to mean. |
| Step 6: | Select Years of Experience to add years that are not included in the default listing. |
In addition to the Salary Assessor, salary surveys are available through ERI Salary Surveys.
For more detailed information on the use of salary surveys to set pay, please see Distance Learning Center Course 73: Analyzing Salary Surveys.
Memory Jogger
Which of the following statements is true with regard to using comparable salaries as a salary determinant?