By Vincent Chow and Peter Saulnier

While having reliable salary information is one of the fundaments of effective compensation management, finding the right salary information can be a challenge for many organizations.

Without it, employers can’t truly compare “apples to apples” to ensure they are paying the employees fair and competitive salaries—and attracting ripe talent with the right range of fit.

Here is everything you need to know about salary surveys, in order to pick the right one for your organization.

Why use salary surveys?

Every organization needs salary information, but not all organizations participate in salary surveys. Some rely on their connections in the industry, the “let me call a friend of mine” approach.  The usefulness of this method depends on the connections, and the results are often not reliable.

A proper salary survey provides HR and management with accurate and reliable salary information—without breaching confidentiality or the worry of wondering if peers are telling the whole truth about their pay practices. This information is crucial for recruiting and retaining employees.  Managing compensation without proper salary information is a bit like flying in the dark without radar.

Good data also serves as an important foundation for an organization’s salary structure design. The call a friend approach can work on occasion, but not as an operational basis. Without a salary survey, you simply lack sufficient solid market data across the range of jobs required to establish an effective salary structure for your organization.

Lastly, a salary survey provides a solid basis from which to respond to the employee who asks, “What have you done to ensure that you are paying us competitively?” The best answer is always that you are using appropriate and credible market salary information to ensure the organization is competitive.

What are the different kinds of salary surveys?

There are two types of salary surveys: “closed” and “open”.

In a closed salary survey, participating companies and job matching methodology are clearly defined.  Data is provided by compensation professionals in participant organizations, and survey consultants closely monitor all processes to ensure participants are comparing “apples to apples”.  Processed by third party consultants, some of these surveys can be purchased by organizations without participating; some cannot be purchased by anyone other than the participating organizations.

Closed surveys can be large scale, general, industry-wide—or comprise only a small group of organizations; the latter is usually known as a customized survey or a peer group survey.  The cost of a customized survey is usually paid by one sponsoring organization or shared by the participants.

An open salary survey—most often posted by recruiting agencies, professional associations or on-line survey companies—is based on self-reporting by many individuals. It is harder to monitor how individuals match their own data, and these surveys usually do not represent an appropriate market for a company.  While they may be readily available, they are usually not the best means available to determining employee salary increases, let alone creating company salary structures.

Criteria for comparing and choosing surveys

When it comes to comparing and choosing salary surveys, there are several important criteria:

Participants / Peer Group – This is probably the most important criterion. The whole point of salary surveys is to compare your organization’s pay practices with appropriate peer organizations.  The first thing you need to review is which organizations participate in a salary survey.  Make sure that the organizations are comparative to your own in terms of industry, location and size.

Jobs Surveyed – Review the list of job titles included in a survey, as well as the detailed job descriptions, to make sure that they are appropriate matches to your organization’s roles.  Very rarely will you find surveys with exactly the same jobs as in your organization, either by title or content.  The rule of thumb is that so long as 80 per cent of the job content is the same, it is likely to provide a reasonable job match.

Methodology – Different surveys have different methodologies to organize their jobs and design their matching process.  Some surveys use job titles and job descriptions.  Some utilize the concept of job families and career bands or levels. Find a survey that has the methodology that is most intuitive for your organization’s needs.

Data Points and Breakdown – Do you need just salary information? Or, do you also need bonus, long term incentive and other cash award information? You should review what kind of data breakdown (“data cuts”) each survey has, and how it presents the results. What type of data breakdown do you require? By geographic area? Size? Industry? Does it have the geographic or industry cuts you need?

Delivery Method – Does it provide you with a print version (e.g. pdf) or with a spreadsheet? Do you require web access for checking the survey database from time to time? This may not be a deal breaker when it comes to choosing the right survey, but it’s good to know in advance what you’ll be getting, to save time and hassle in utilizing the results.

Fee – All factors being equal, choose the surveys that fit your budget.

One tip to get your salary survey budget approved—present the survey cost as a percentage of your overall payroll budget. Compared to the overall payroll budget, salary survey costs are usually small and by all accounts a very good investment to ensure your organization spends its payroll costs wisely.

How many surveys does an organization need?

Using more surveys obviously provides more data for your compensation management. They can also add more cost and require more participation time.

Many organizations use at least two surveys: one for their industry-specific (operational) roles; and another for their general corporate functions including finance, HR and IT.

While the ideal is to find a survey that can capture all roles in your organization, often enough organizations need to participate and purchase multiple surveys to capture sufficient role relevant data.

Where to look for the right salary surveys

One of the easiest ways to find out which surveys are the right match for your organization is to simply call your competitors or peer organizations, particularly when it comes to jobs in your specific industry. Here is where the call a friend approach works very well.

Often there are salary surveys designed specifically for your industry. If so, no need to reinvent the wheel. Choose the most appropriate one and participate.

If you do not find a good survey match already exists—or your organization’s survey needs are unique—consider organizing a customized salary survey.  Customized surveys usually cost more but allow you to tailor every part of the survey, including the jobs surveyed, participant base and data points collected.  As such, they also provide a much more focused view of the market relative to industry and geography.

Commit to a fair and competitive pay program

Selecting the right salary surveys to participate in and purchase is a commitment for any organization in terms of the cost and time spent. More importantly, it is a commitment to employees that your organization is doing its job to ensure a fair and competitive salary program.

Following the criteria above, you will be able to choose the right salary surveys for your organization and take your first step towards establishing an effective pay program.

Peter (Peter.Saulnier@LoganHR.com) and Vincent (Vincent.Chow@LoganHR.com) are partners with Logan HR Management Inc., a consulting firm specializing in career transition (outplacement), compensation, and performance management.

(PeopleTalk Summer 2013)