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Salary Survey Information
Current salary information isn't automatically available to organizations or employees.
Q How do organizations collect salary information?
A: Organizations usually purchase salary surveys which may require participation.
Salary surveys are estimates of labor market pay rates. Knowing how to select and use them is important. (See DLC Course 73: Analyzing Salary Surveys.) Salaries change over time, so most salary survey information is only useful for a limited time period providing estimates for a single point in time. Also, salary rates can change quite rapidly during times of tight labor markets.
Q: How do employees collect salary information?
A: Employees usually estimate salary rates for jobs through interaction with recruiters, on-line research or other informal channels like peers, family, and social networking sites like Glassdoor.
Employees embark on a job search when they are dissatisfied with their current job or when they are unemployed. Since each employee's search is unique, it is unlikely two individuals will have the same salary expectations.
The availability of free online salary information has enabled employees and organizations to have a dialogue on the topic of salary rates. Online research typically provides employee provided pay data, now referred to as crowdsourced data, versus the more reliable data that is employer provided compensation information. The providers of crowdsourced market pay rates incorporate statistical methods to normalize their data as it tends to be inflated by the individuals submitting their own data. Data collected via survey participation by HR and total rewards professionals is quality controlled by confirming that jobs are appropriately matched before the submitted compensation data is included in the survey results.
Maximization
In the economic employment exchange, each stakeholder tries to obtain the most from the other side at the least cost.
Let's take a look at this exchange…
Employers. Companies would prefer to lower pay or replace employees when the labor supply increases. However, there are high costs involved in recruiting new employees and in lowering the pay of current employees. These costs lead to an economic principle that "wages are sticky on the downside," also referred to as wage rigidity. When the labor supply is high, it is easier to hire better employees than to lower pay. On the other hand, when demand for labor declines, employers are more likely to lay off employees than to adjust pay.
Employees. There are costs involved with switching jobs each time salary rates rise. Compensation aside, employees have preferences for different types of jobs, organization culture, and managers. These factors enter into the choice to stay or leave. When higher paying jobs are located outside of a reasonable commuting distance, a move to a new job involves a series of economic and psychological costs. Then there's the issue of benefits. People often feel trapped in a job with benefits because they would lose those benefits if they switched jobs (e.g., 2 weeks vs 3 weeks paid time off; 401K employer contribution vesting).
Memory Jogger
To reduce labor costs in poor economic times, employers generally: