June 13, 2019
Market pricing is an essential component of any successful employee compensation and total rewards program. Unfortunately, market pricing is also complex and cumbersome, with many factors and moving parts. These parts include the processes of submitting salary survey data, determining your market pricing policy, reviewing your compensation strategy, and applying salary survey data to your positions and compensation structure. Because there are so many integrated elements, your market pricing initiative can take longer than expected and require diligent oversight throughout. So, to help make managing your market pricing process easier, let’s examine some of the required steps:
The Salary Survey Submission Process
The first step for most employers is the salary survey submission process. Whether to participate in salary surveys depends on the size of your organization and if you have adequate staff with time available to complete the surveys. Large organizations with a dedicated compensation team will often participate in salary surveys, while smaller or medium-sized organizations often opt to get their data from compensation consultants (as this saves time and cost, especially considering they might not have time to sufficiently evaluate the resulting salary data report). Before you start downloading and submitting data, consider completing the following steps:
- Review job descriptions that have changed in the last year to see if survey matches should change.
- Ensure you have job descriptions for all new jobs created since you last completed survey submissions, so you can match your new jobs against your survey matches.
- Clean up outdated job descriptions. You may want to put each department, division, or even a few of each, on a regular update schedule whereby job descriptions must be reviewed and reapproved every couple of years.
Salary survey submissions can be time consuming, so be sure to weigh the time it takes to complete your data submission against any lower costs you might receive on the results.
Determining Your Market Pricing Policy
The second step in market pricing is determining your market pricing policy. While waiting on salary data to be returned from survey vendors, use that time to create or review your market pricing policy.
Just what IS a market pricing policy? It is your guide for how you will use salary data when it becomes available. Your market pricing policy should address by job level what scopes of data you will use to benchmark. These scopes typically include:
- Number of employees
- Revenue or asset size
- Geographic area for data comparisons
- Use of generic or industry-specific data
Reviewing Your Compensation Strategy
Another step you can take while awaiting survey data results is to review your company’s compensation strategy. To fine tune your strategy, ask yourself these questions:
- Do you wish to position your company’s compensation at less than market rates, at market, or above market?
- Do you need a different compensation strategy for various divisions or various segments of employees?
- Is it easy for you to attract talent, or do you have pockets where talent is scarce?
- How do you want your pay mix (base-to-variable) to be relative to where the market is?
Applying Market Data to Your Internal Positions
Once you have solidified these decisions, you are ready to take your market data and apply it to your employee data. Use your survey data to see if any of your positions have moved up or down in the market and decide what course of action you wish to take as a result of market movement. You should also use your data to validate your current salary structure. Don’t forget to “age” your data when you receive it as many months may go by between your submission and when you receive your salary survey results.
Be sure to compare your employees’ base data relative to the market position you want as well as your employees’ total cash data relative to this market position. Additionally, you should compare your actual pay mix to the market data pay mix. Once you know your position to market in base pay and total cash, you will be able to roll your data up by employee level, department, division, or even on a corporate level.
Lastly, look more closely at positions where market movement has been significant and adjust as necessary to ensure you are keeping employees’ pay positioned relative to your desired compensation strategy.
The Bottom Line:
Market pricing is complicated. It is time-consuming. And the complexity of the process can make it easy to miss key factors that could undermine your market competitiveness. That’s why many companies turn to compensation consultants like us at Total Reward Solutions. How can we help? For starters, if you don’t want to go through the tedious process of salary survey submissions, Total Reward Solutions always has current data available – from multiple databases – and can market price single or multiple jobs very affordably compared to the cost of internal processing or other external resources. From there, Total Reward Solutions can help you apply survey data to your jobs and analyze it for you. And if you already have market pricing in place for most of your positions but have gaps for certain positions, contact us. We have market data available for many different industries. To learn more, contact us today at 317.589.8529. And to explore market pricing in greater detail, check out my book, Compensation Sense 101.
Cassandra Faurote
About Total Reward Solutions:
Total Reward Solutions is your trusted partner for compensation services. Led by Cassandra Faurote, professionally certified Compensation and Human Resources expert and author of the book Compensation Sense 101, Total Reward Solutions offers a broad range of compensation and total rewards consulting services to help your organization attract top talent, motivate employees and retain top performers. We can partner with you on a project basis, on retainer, or as your total outsourced solutions provider for compensation services.
Call us today at 317.589.8529 to discuss how we can help your organization develop and implement competitive and effective compensation and total reward programs.