Looking to Benchmark Pay?
Labor Market
Q: Why do you have to look to the external labor market when setting pay?
A: When an organization is establishing its compensation policy, it should attain external competitiveness. In other words, salaries need to be high enough to attract, motivate and retain talent; but salaries shouldn't be set so high that they drive labor costs beyond what the organization can afford to pay. Salary surveys help to determine the appropriate pay rates for various positions.
Salary surveys can be specific to a particular:
- industry
- job
- organization size
- location
It's very important to know your labor market. This is key to selecting appropriate salary surveys.
Select surveys and make market comparisons considering your "job pool" market for each job group. "Job pool market" is the organization's relevant labor market where an organization recruits employees and to which employees go when they leave the organization. As such, the labor market will vary by job, employee level (education/experience), and job family. So, match to the correct labor market for your organization and your jobs.
Although an organization may conduct its own survey, most tend to use existing surveys conducted by government agencies, professional associations, private salary survey firms, or consultants.
Salary Assessor Software
An alternative to traditional salary surveys is ERI's Salary Assessor®, which provides an interactive database of extensive survey data. The Salary Assessor tool compiles compensation data for over 18,000 job titles around the world to help you gauge your organization’s compensation competitiveness. The following case illustrates how an employer can use survey data, obtained through the Salary Assessor software, to ascertain the going rate for a particular job.