Magazine article HRMagazine

The Art of Setting Pay

Magazine article HRMagazine

The Art of Setting Pay

Article excerpt

Identify the best salary survey data, then use it with care.

Early in her tenure with United Grinding Technologies Inc., Director of Corporate Human Resources Christine Taylor, SPHR, faced the daunting challenge of developing a formal salary structure for the company's 140 employees. The trouble was that the jobs and the skills required for the grindingmachine business, based in Miamisburg, Ohio, were not like comparable jobs in most salary surveys. "It was very hard to find exact matches," Taylor says. "We were not able to find benchmark jobs."

Taylor worked with managers to develop detailed job descriptions listing the skills required for each position, then used the job descriptions to find survey data that was a close fit. She ended up relying on compensation data from the U.S. Bureau of Labor Statistics (BLS) as well as industry and professional association surveys to set median salaries and consistent salary ranges for most positions. Because she could not find exact matches for all of United Grinding's positions, Taylor searched until she found two or three jobs requiring skills that were comparable to the manufacturing skills that her company needed. "It is more of an art than a science," Taylor says.

Compensation is by far the largest cost item for most companies, so it demands careful consideration. Compensation professionals should find meaningful, reliable compensation data and then use the data to benchmark jobs and set pay levels according to the going market rate and the company's compensation philosophy.

As Taylor's experience illustrates, this process is not always straightforward. "A good benchmark job is a bridge toll taker because everyone knows what they do-they sit in a booth and take tolls," says Ira Winsten, director of compensation and benefits for CenterPoint Energy Inc., an energy distribution company based in Houston. "It is when you get into higher levels and roles specific to the organization that it becomes more difficult to benchmark jobs."

Choosing the Surveys Although there has been some consolidation among compensation survey providers in the past few years, there is still an array of choices for compensation data, including consulting companies, industry and trade associations, and the BLS's pay and benefits surveys. No matter the source, compensation professionals should evaluate each provider and its data with care to ensure that the data are timely and valid.

There are a growing number of free-usually Internet-based-salary data sources, but HR professionals should carefully weigh whether to use information from them. Any data that is self-reported by individual job holders about their own positions and salaries may not be as reliable as data produced by a more rigorous survey process.

"When data are reviewed by thirdparty professionals, those professionals can look at the job matches and spot any data inconsistencies, which makes that data more reliable than the selfreported data in some Internet surveys," says Andrea Averill, a principal with Strategic Rewards Consulting Group in Philadelphia.

Compensation specialists who choose to use information from free sources should compare it with at least three other data sources to validate it, advises LoriAnn Penman, SPHR, director of human resources at Spectrum Comm Inc., a government contractor based in Newport News, Va. Free data from online sources tend to be at least a year old, she cautions.

Furthermore, surveys with fewer than 10 or 15 companies "do not necessarily provide a good sense of what the overall market looks like," says Jason Adwin, vice president at Sibson Consulting in New York City. However, he notes an exception: A custom study of the largest 15 companies in a specific industry or labor market is likely to be more meaningful than a general study of 15 companies.

In addition, the cost of compensation surveys always raises concern among budget-conscious HR leaders. …

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