Written by Stephan Duncan
June 17, 2019
A salary comparison, also known as a wage comparison or pay comparison, is a comparison of the pay for two or more positions, either within your organization or outside of it. While many pay comparisons focus on the base salary, they can also include other pay elements as well, including bonuses and incentive pay vehicles.
Performing a salary comparison using HR-reported market data is a critical step in the market pricing process. Whether you use data from traditional salary surveys or an aggregated source of pay data like CompAnalyst Market Data, comparing pay rates in the market can help you assess the going rates for similar roles at other companies.
Internal salary comparisons, on the other hand, can help you assess if you have any potential issues with pay inequities or salary compression. Tools like salary structures, which make it easy to compare the pay for multiple jobs within your organization simultaneously, can help you quickly spot potential issues - whether you're comparing pay within your organization or out to market.
Whether you're hiring for a new position, planning for annual salary increases, or giving an employee a well-deserved promotion, salary comparisons can help you ensure your pay remains externally competitive and internally equitable. The steps below outline how to properly compare the pay for two positions, using data from our free Salary Wizard.
Using a salary comparison tool, such as our Salary Wizard, can help you streamline the salary comparison process as you begin to look out to market. In the example below, we'll be comparing two similar positions, Marketing Assistant I and Marketing Assistant II, which fall into the same job family, function, and focus within our taxonomy. As we'll only be using one source of market data for this pay comparison, we'll be focusing on why these jobs are different - and therefore why their pay is different as well. This exercise will help us determine the right job match for an internal position we're trying to price.
While we're looking at the pay for two different jobs in our example below, the salary comparison process is similar when you're comparing the pay for the same job across different data sources. Once we've found our job match, we'll discuss how to perform a salary comparison with the market, as well as the data sources you can use to market price our job.
Finally, we'll look inside our organization to assess where our job falls within our job worth hierarchy and internal pay structures based on what we now know about our job match and price.
When you compare the Marketing Assistant I and Marketing Assistant II jobs using our Salary Wizard, the first thing you'll notice is that the median base salary for a Marketing Assistant I is $42,019, whereas the median base salary for a Marketing Assistant II is $47,437. So what makes these jobs so different that they'd show a $5,000 difference in price?
When comparing two jobs, you need to look beyond the job title to understand the real differentiators between the roles you're examining. In this example, a Marketing Assistant I and Marketing Assistant II fall into the same job family, function, and focus within our taxonomy, but they sit at two different levels - meaning they perform different jobs duties, require different levels of experience, and more.
Consider the following sections within the job listing in your comparison:
As we consider the internal role that we're trying to match, we need to look at not just the job description, but also key data items like required years of experience and education to assess which job in truly the best match. In this case, because we're hiring for a true entry-level Marketing Assistant role, we're going to match our internal job to the Marketing Assistant I job.
Once you have identified a strong job match, you can use a similar salary comparison method to compare the prices for your job across multiple different data sources. Compensation best practices require you to compare each job to 3-5 data sources while market pricing to ensure your pricing is as accurate as possible.
When comparing salaries for the same role across different data sources, the first step is to ensure that you have a job match in each source. Unfortunately, different data sets can contain different jobs, job families, and levels, necessitating salary comparisons within each data set to find the right match.
After matching your internal job to the right job in each data set, consider the types of companies for which you want to compare prices. Are you interested in learning how companies that are similar to yours are pricing their jobs? Are you competing for talent for this role from larger or smaller companies than yours? Are you typically recruiting within your industry, or bringing people in from outside of it? The answers to these questions will help you define your scope - the industry, company size, and geographic location in which you want to execute your salary comparison.
Defining your matches and scopes in each data set will allow you to accurately price your job within that set. The final step in market pricing is the true salary comparison - assessing how prices compare across your data sets. This process allows you to define a true market price for your internal job, informed by multiple data sources to ensure accuracy.
Compensable factors are adjustable pricing variables that you can edit, add, or remove based on the specifics of your internal job. When job matching, you may find that your internal job has different requirements than any of the benchmark jobs you can compare against. In these cases, you can leverage compensable factors to make adjustments to your price to more accurately reflect your internal job description.
Compensable factors can include:
By conducting a salary comparison between an unadjusted (benchmark) job and a job you've adjusted with the appropriate compensable factors, you can quickly analyze how different pricing factors have increased or decreased the market price for your internal job.
In the example below, we've adjusted the Marketing Assistant I job in our Salary Wizard to require 5-6 years of relevant work experience, bumping the median salary up to nearly $43,000 per year.
Salary comparisons can also be used to keep pay fair within your organization. By comparing the salaries of employees within one job, the salaries of all jobs within one family, or even the salaries of similar jobs in your organization, you can quickly spot potential data outliers, pay inequities, and salary compression issues.
Download our white paper to further understand how organizations across the country are using market data, internal analytics, and strategic communication to establish an equitable pay structure.