The labor market is tightening.
Candidates who were available just 3 months ago have found employment, and companies that are actively recruiting for new talent are now competing with a much larger pool of employers. The upshot is that there are still plenty of skilled and experienced workers in active job searches. But now, employers need to invest more bandwidth and creativity to attract them.
In Part 1 of this series, I outlined the elements required for calculating the right salaries. Best practices in compensation include: Well constructed job descriptions with functional requirements clearly defined; Matching the open position to standard occupational codes; and using accurate market data to establish salary ranges.
This post is focused on finding good data for setting pay
If you’re looking for salary and wage data to benchmark your company’s pay scales to the market, there are 3 different types of sources available. Each one uses different methods and its important to understand them in order to avoid bad decisions.
The first source is online salary surveys. These are easy to use and available to everyone. Websites like salary.com and indeed.com provide aggregated salary information based on advertised job openings. Approach this data with a great deal of skepticism. For one thing, most companies don’t openly advertise their actual pay ranges. So relying on numbers from job postings isn’t going to provide a true picture of what they’re paying employees. Another deficiency is that the data is not statistically significant. The results aren’t obtained from scientific sampling. It’s really just a grab bag of random postings organized under a search algorithm.
So if you’re looking for accurate data, a better source is industry-specific salary surveys.
Most large industry and professional associations perform salary surveys covering the specific jobs in their field. Depending on the association, these may be available online or for a reasonable fee. The best part of these surveys is that they are accurate. Generally the data is coming directly from the member professional. The downside is that they focus on the higher-level positions (i.e. grant writer, auditor, vice president), and don’t provide much information for rank-and-file roles. Also, they are industry focused rather than geographically focused. No company in Iowa should pay their employees NY wages.
Our third source provides the best picture of actual wages paid. It’s free, it’s available to everyone, and it’s updated on a regular basis.
The downside is that you have to work a little to use it. Surprise … it comes from the federal government. The Department of Labor’s Bureau of Labor Statistics collects and sorts the actual wages paid for every occupation in every region of the country. And they make this data available to all of us on their website bls.gov. Over the years, I’ve found that the BLS’ Occupational Employment & Wage Estimates provide the most accurate basis for setting competitive pay.
To use it effectively, all you have to learn is how to select the appropriate geographic region (it’s organized hierarchically by Metropolitan Statistical Areas MSA, Metropolitan Division, and Nonmetropolitan Areas), and which of the 800 occupational definitions you want to compare. It will show you exactly what people are being paid in your area for specific jobs.
If you’re going to hire anyone this year, take the same amount of time to analyze the salary cost that you would for making any large purchase. Good data informs good decisions.
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