Compensation Survey

INSTITUTE OF MANAGEMENT TECHNOLOGY

PROJECT REPORT
COMPENSATION SURVEYS

SUBMITTED BY:

Vidur Pandit (10DCP-094)

Human Resource Planning | IMT G DCP

Table of Contents

Introduction ............................................................................................................................................................................... 3
Compensation and Benefits ............................................................................................................................................ 3
Important of Compensation and Benefits ................................................................................................................ 3
Compensation Surveys .......................................................................................................................................................... 5
What are Compensation Surveys? ............................................................................................................................... 5
Objectives of a Compensation Survey ........................................................................................................................ 5
Types of Compensation Surveys .................................................................................................................................. 6
Standard Surveys ........................................................................................................................................................... 6
Custom Surveys .............................................................................................................................................................. 6
Types of data gathered ..................................................................................................................................................... 7
How You Can Make Good Use of Compensation Strategy ............................................................................. 8
Equitable Compensation ............................................................................................................................................. 8
Determining Rates of Pay ........................................................................................................................................... 9
Salary Increases .............................................................................................................................................................. 9
Pay Increase on Promotion ...................................................................................................................................... 10
General Salary Adjustment ...................................................................................................................................... 10
Automatic Salary Progression ................................................................................................................................ 10
Anomalous Salary ........................................................................................................................................................ 11
How to Conduct a Salary Survey ..................................................................................................................................... 11
Whom to Include in Your Survey ............................................................................................................................... 12
Making Contact with Prospective Applicants ....................................................................................................... 12
Compare apples to apples ............................................................................................................................................. 13
Review job descriptions or position profiles in the survey report ......................................................... 13
Note Province and Region ........................................................................................................................................ 13
Note operating budgets of respondent organizations .................................................................................. 14
Note the types and descriptions of respondent organizations ................................................................. 14
Note the education level and status of respondents ..................................................................................... 14
Note the year of data collection and the date of the report........................................................................ 14
Note if the survey is a one-time event or if it's repeated............................................................................. 14
Multiple survey sources ............................................................................................................................................ 15
Number of participants ............................................................................................................................................. 15
Compensation Survey Checklist ................................................................................................................................. 16
Evaluating Its Validity ..................................................................................................................................................... 16

INTRODUCTION

Compensation and Benefits

Compensation & Benefits (abbreviated “C&B”) is a sub-discipline of Human-Resources, focused on

employee compensation and benefits policy making. It is also known in the UK as “Total Reward”

and as “Remuneration” in Australia and New Zealand.

The area of Compensation and Benefits belongs to the most specialized areas in Human Resources

Management. Compensation and Benefits usually plays the role of the HR Controlling, setting the

rules and procedures around the salaries, variable pay and benefits.

Compensation and Benefits is usually the function of HRM most connected with the competitors on

the market and it sets the compensation policies, which are fully competitive on the job market, but

the policies still meet the targets defined by the organization.

Important of Compensation and Benefits

Compensation is an important motivator when you reward achievement of the desired organizational

results. It is said "that money is a powerful source of motivation." But it is also said that salary increase

can only motivate until the next pay increase is due. Imagine what the impact is if an employee is at the

maximum point of his or her salary range. Achievement of the desired behaviors is important in order to

enhance your organization's effectiveness. In turn, this increases the possibility of success.

Compensation strategy can reinforce the organizational culture that you desire. This is an enabling

organizational culture under which pay is linked to performance.


Your compensation policy must reflect your strategic business objectives. This becomes all the more

important when determining CEO compensation. You must clearly define the objectives of your

organization so that you can achieve them by using compensation strategy. These are communicated to

everyone soon after a decision is taken. It can happen that good decisions fail to achieve results due to

poor communication. By providing the right combination of benefits which are non-cash compensation

your organization can motivate employees and make them stay to help in its progress.


COMPENSATION SURVEYS

What are Compensation Surveys?

Organizations have to bridge the gap between the industry standards and their salary packages. They

cannot provide compensation packages that are either less than the industry standards or are very

higher than the market rates. For the purpose they undertake the salary survey. The Salary survey is the

research done to analyze the industry standards to set up the compensation strategy for the

organization. Organizations can either conduct the survey themselves or they can purchase the survey

reports from a reputed research organization.

To determine the prevailing rate for a job, companies can "benchmark" jobs against compensation

surveys that are detailed and specific to the companies' industries and regions. A good compensation

survey uses standard, proven methods of data gathering and statistical analysis to determine how much

companies pay for a specific job in a specific industry. A number of types of organizations conduct salary

surveys, including compensation information businesses, compensation consulting firms, industry

associations, educational institutions, and state and federal governments.

Objectives of a Compensation Survey

 To gather information regarding the industry standards

 To know more about the market rate i.e. compensation offered by the competitors

 To design a fair compensation system

 To design and implement most competitive reward strategies

 To benchmark the compensation strategies


Types of Compensation Surveys

Standard Customized

Standard Surveys

Standard surveys are undertaken by organizations on a regular basis. These surveys are conducted

annually based on the organizational objectives. These surveys attempt to cover the same

companies every year and provide the same time of analysis. The reports are published annually by

the research organizations. The organizations willing to formulate their compensations strategies

based on the surveys purchase the reports from the research organization.

Custom Surveys

At times, a few organizations need to know some specific information. The surveys which cater this

need are known as custom surveys. The organizations either higher research organizations to

conduct these surveys for them or they themselves conduct the survey by sampling few of the


competitors on their own. These surveys do not have any time interval. They are undertaken as the

need arises. They focus on important issues usually one or two.

Types of data gathered

Salary Surveys are analyses of compensation data. This data may include quantifiable aspects of

compensation such as:

 Base salaries

 Increase percentages or amounts

 Merit Increases

 Salary Ranges

 Starting Salary

 Incentives/Bonuses

 Allowances and Benefits

 Working Hours

Salary Surveys may also include non-quantifiable aspects of compensation such as:

 Educational Requirements

 Geographic Location

 Source of Hire (Internal/External)

 Working Conditions


How You Can Make Good Use of Compensation Strategy

You can use compensation to attract and retain competent people. This objective requires you to offer a

salary that is not lower than the market rates. When you want better customer service, reward

employee behaviors that produce superior service.

Do not harp on the amount of salary you are paying yet at the same expect good performance. Your

people may conclude that there is insincerity on the part of management. Match the written policy with

the right and appropriate actions that demonstrate to your employees that you are a fair and just

employer.

Equitable Compensation

Like employees working elsewhere in other organizations, your people are concerned with

compensation equity. Take this into consideration in drawing up your compensation strategy. When

people notice inequities, their morale and motivation will suffer.

But by adopting a compensation strategy, you don't have to worry about your good people resigning. If

they believe in your management's fair-handedness, it is very probable that they will not go away.

Decision to leave an organization requires considerations other than or in addition to dissatisfaction

with compensation.


Determining Rates of Pay

Compensation strategy involves considering to adopt any of several ways in setting rates of pay.

 Pay increase based on employee's length of time spent on the job. This is seniority-based pay

that is a good motivator in employee retention. But here, you are not rewarding performance

 Performance-based pay is intended to motivate employees to perform better.

Such a plan is becoming more common whereby the manager and employee agree on the job

goals and performance criteria at the beginning of a specified period, usually at the beginning of

the year. The effect of this as a motivator can vary from time to time and from situation to

situation

 You can give pay increases based on job-related skills and knowledge. This is intended to

motivate your people to gain additional skills, acquire new competencies and knowledge. Under

this method, you do not pay employees for the job they are-doing, their job title or seniority.

This is competency-based pay

Salary Increases

Your compensation strategy needs to align your compensation objectives to your organizational

business objectives. Salary increases are part of this plan. By this, you are recognizing employees’

contribution to the accomplishment of your organization's objectives.

Consider implementing a policy whereby employees are given salary increases when your organization

can afford to give them, in arrears. This ensures that good performers will continue to perform. They

know that they will get what is due to them.


Giving salary increase to an under-performer is not justified. There are organizations who have

implemented a policy that employees who are in the last five percent of the performance bracket will

have to go.

Pay Increase on Promotion

When an employee is promoted, you may or may not give a significant pay increase. It is not justified to

pay an overpaid employee a significant promotional increase. Consider all relevant matters before you

make a decision. One important thing to consider is the pay parity with people in the same category and

performing similar tasks.

General Salary Adjustment

In performance-based pay, do not give across-the-board increases. Differentiate between outstanding,

average and non-performers. If not, your employees will lose trust in the system, resulting in little or no

motivational impact. Paying the right salary has impact on employee performance and organizational

effectiveness.

Automatic Salary Progression

This has no relationship to performance. Avoid it as it does not encourage your employees to improve

their performance. This is fairly common in the public sector. But there are now significant changes

made in accordance with sound human resource management principles. The only occasion where you

can consider giving some salary increase that is unrelated to performance is in respect of increase in the

cost of living.


Anomalous Salary

If you have any employee whose salary is below the minimum for the job or too low in relation to the

employee's performance and experience, make the necessary adjustment. This is in addition to an

increase based on performance merit.

On the other hand, you may have an employee who is paid above the maximum point in the salary

range for the job. You may freeze further salary increases until the relevant pay level is reached. Then

give merit increase based on performance. Don't give increase if performance is unsatisfactory.

HOW TO CONDUCT A SALARY SURVEY

Public and private organizations, including nonprofits, nearly all use market parity as a starting point in

structuring their pay systems. Even when these systems are not formalized, decisions about pay are

usually based on some kind of market-based rationale.

Employees expect objectivity and equity in decisions about their pay, and good managers do their best

to meet that expectation. One very important tool to help them determine market parity is the salary

survey.

Surveys can be as casual as a telephone call regarding a single job or as structured as a ten-page

questionnaire sent to dozens of agencies. This discussion covers a middle ground between these

extremes; it is aimed at the agency administrator who is not a statistician and whose experience in

salary administration may be limited.


Whom to Include in Your Survey

Consider the following in deciding which organizations to include in your salary survey:

•Agency location. Are your interests local, regional, or national?

Surveys on support staff jobs are usually done locally because recruiting for those jobs is local.

Professional or management job surveys are regional or national because that labor market is

geographically dispersed.

•Agency size. Big organizations tend to have more higher-paying jobs carrying more responsibility. Small

agencies often find data from bigger organizations useful, but the reverse is seldom true

•Comparability of agency function or services. Are activities, clients served, and revenue sources similar

or complementary to those of your agency? A nonprofit agency that serves a disadvantaged clientele

and is funded by government grants may have little in common with one that serves the arts and is

financed by private philanthropy

•Public/private/nonprofit boundaries. Do people in your organization have employment alternatives in

other kinds of organizations? If so, you should survey all organizations that demand the same skills that

your agency requires

•Quality of salary management. Is the agency experienced in administering pay? Beware of limiting your

survey to inexperienced agencies; mistakes can be compounded by following poor examples

Making Contact with Prospective Applicants

Never drop a salary survey questionnaire in the mail without first making personal contact with

someone in the prospective participant agency. This should be a person with the authority to release the

information you want. In small agencies, that will be the chief executive; in larger ones it will be the

business manager, controller, or personnel director. In any case, the questionnaire should be addressed

to an individual who is expecting it and who can act on it. Prior telephone contact is usually sufficient;

explain the purpose of the proposed survey, its scope, and potential advantages to all participants.

Make your appeal on the basis of helping all participants solve common questions about salaries, not

just on the basis of helping to answer your own questions.

Compare apples to apples

It is important, when reviewing salary surveys, to make sure that you are comparing information that is

similar. Looking at salary and benefits levels in organizations vastly different from your own will not

provide the information you need. Here's what to look for:

Review job descriptions or position profiles in the survey report

It is important to look at job duties and responsibilities not just job title when deciding if salary survey

information is comparable. To be comparable the jobs must have a similar level of responsibility and

range of duties.

Note Province and Region

Appropriate salary comparisons will come from agencies with a similar geographic focus: local, regional,

provincial or national. At the local level, the best salary comparisons will come from other organizations

in the same city or town. Good salary comparison may come from a different city or town with similar

labor market characteristics and a similar cost of living.


Note operating budgets of respondent organizations

As a general rule larger operating budgets mean higher salaries. Comparable salaries come from

organizations of a comparable size. Size is usually estimated by using the operating budget or looking at

the number of paid full-time staff.

Note the types and descriptions of respondent organizations

Are the functions, services offered, clientele, and sources of funding of the organizations in the salary

survey comparable to your organization? For example, an organization providing childcare services

through provincial funding may have very different salaries than an organization providing parent/child

resources through its own fundraising.

Note the education level and status of respondents

The level of education required for a job and the type of employment arrangement can have an impact

on salaries.

Note the year of data collection and the date of the report

Labor market forces can result in significant changes in salaries in a short period of time. More recent

data will be more useful in establishing current salaries.

Note if the survey is a one-time event or if it's repeated

Surveys that have been repeated provide an added advantage of showing trends in salaries over the

years of the survey.


Multiple survey sources

As with any form of research, it is important to use multiple data sources to narrow in on the "true"

answer. Relying on a single source can be misleading if that source doesn't perfectly reflect the market

in question. WorldatWork suggests that compensation analysts should use multiple data sources

wherever possible; consulting firms and academics agree. The exceptions come when there is only one

data source, or when there is a spot-on data source, such as a custom survey, that truly describes a

precise market.

Number of participants

Make sure the participants are a good sample of the recruiting market. Generally, eight to ten

participating companies is a good sample for positions below the management level. The sample size

should increase the more senior the positions being surveyed, both to get a good representation and to

allow for more job matches, since each company is organized differently. There could be limited pay

data in some industries, or the available data might not be representative of the industry because of a

low participation rate in the survey.

Some firms reveal a list of participants, or at least those well known within the industry. The surveying

company may disclose big-name participants to draw more interest from smaller companies. A list of

major employers can also add credibility to the survey.

An important exception to note is that if a compensation analyst or compensation consulting firm is

using multiple surveys to produce their own derivative market numbers, they will aggregate the data by

combining the surveys, placing differing weight on different sources and sometimes even making a

qualitative adjustment. When the data has been aggregated in this manner, it is not customary to report

numbers or names of participants.


Compensation Survey Checklist

Here are some considerations to weigh for a company who is deciding whether to purchase a

compensation survey.

 The background of the survey research firm and cosponsors, if any

 The scope of the survey

 The survey methodology

 The number of participants in the survey

 The names of participants

 The number of incumbents covered by the survey; and the sample size for each salary

 The relevance of the job descriptions to the positions being benchmarked

 The effective date of the survey data

Evaluating Its Validity

It’s important to ensure that the salary survey was conducted in an objective, valid and reliable manner.

What are the sampling frame, sample size and response rate? What is the margin of error? Is it

reported? For information to be valid it has to come from a large enough sample size. For example, if

you collected just three salaries for the same position and one salary is high, one is low, and one is in the

middle, you wouldn't be able to conclude much because your sample is too small to provide valid and

useful information. You also want to be sure that the information is reliable. Reliability means that the

survey gives consistent results. You should therefore carefully consider how the information is gathered

and decide if it makes sense to you. For example, if the survey instrument is included in the report,

assess if it would be easy for you to give accurate answers to the questions.


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