Looking to Benchmark Pay?
SUMMARY
Salary administration is a complex process requiring mastery of many quantitative skills. This course teaches some of those skills that you will need to administer pay in your organization.
Interpreting Salary Surveys
Salary surveys are widely used in salary administration to set pay. Many surveys report mean salaries, so this course taught you to differentiate between the various types of averages:
- arithmetic mean
- geometric mean
- weighted average
Medians
Because salaries are often skewed, it is often better to use medians in your analyses. The median is the rank ordered central tendency of a data set and is often referred to as the midpoint of a distribution. Medians can give you a more accurate measure of the middle of a salary distribution if that distribution has outliers. Also, using the median you can find out if a statistically significant difference exists between what your organization pays in salaries and what the market pays.
Modes
At times it may be useful to know the salary that occurs most frequently in a survey's results. In this case, you would calculate the mode of the distribution of salaries. The mode is the observation that appears with the greatest frequency. Although not always the case, the category with the greatest frequency concentration often tends to be located at or near the center of a distribution.
Maturity Curves
Maturity curves are important in salary survey analyses because "time on the job" has great impact on pay. As analytical tools for surveys, maturity curves can define the average expected rate of pay for technical professions like scientists, engineers and also nontechnical professions like sales or accounting.
Salary Structure Formation
Once you've gathered competitive salary information from the market, you can then establish a salary structure. Salary increase matrix formation, compa-ratios, and grades and ranges are quantitative tools that you can use to set up your organization's salary structure.
Salary Administration
Once your salary structure is in place, however, your work is not done. You will need to monitor it continually, making sure that your company's compensation policy is competitive, fair, and impacts your organization's bottom line as planned.