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Salary Surveys
Information about the compensation levels of the labor market, other organizations, industries, and/or geographical areas comes from salary surveys. To find out how to select a salary survey or conduct your own, see DLC Course 73: Analyzing Salary Surveys.
The salary survey is the basic source of external compensation data. But compensation data is collected on current pay. (Actually, it isn't even current pay; it's historical pay by the time the salary survey has been analyzed and becomes available to users.)
The external market's pay levels are constantly changing depending on when salary increases are granted. So, survey data is always historical and needs to be brought up to the current level by aging the survey data.
Aging survey data
Aging external market data is the required calculation to move salary survey data from one point in time to a current or future date. It consists of applying a percentage increase to the results in the salary survey so that all market data is adjusted to the desired point in time. The percentage amount usually depends on the historical market movement of salaries and projections being reported via salary increase budgeting surveys. The desired date typically will be consistent with an organization's desired market strategy.
Typically, a salary structure adjustment is approximately one percent below the average market movement of salaries for a given year. In higher inflation countries, the salary structure adjustment could be one to two percent or even more below the average market movement of salaries for the applicable year.
Here are some examples:
Salary surveys in the United States would need to be adjusted to a point in time consistent with the market movement of salaries. These are examples of typical market movements of salary based on trends and the economy of the United States at different points in time:
1980 – 10.0% - High Inflation
1990 - 5.5% - Strong Economy
2000 - 4.5% - Economic Decline
2010 - 2.5% - Financial Crisis
2015 - 3.0% - Recovering Economy
2019 - 3.0% - Strong Economy
2020 - 3.0% - Global Pandemic (most increases administered prior to economic downturn)
2023 - 4.0% - High Inflation
Keep in mind that changes in salary increase budgeting tend to trail changes in the inflation rate.
Memory Jogger
For next year's compensation planning, data from salary surveys should be: