Making comparable compensation choices to market pay rates

As an employer, you want to be offering competitive wages and benefits. So how do your compensation choices compare to those of similar organizations and within your industry? The answer isn’t always straightforward. There are numerous factors to consider. For example, the same job title doesn’t equate to the same responsibilities in different companies.

Understanding market pay rates and the differences in compensation choices amongst other organizations will help you make better-informed decisions when it comes to paying your staff. Not only will you pay fairly, but you’ll also remain competitive in your industry. Ultimately, you want to attract and retain top talent.

Assessing Your Current Pay Rates

Making comparable compensation choices starts with analyzing your current pay rates. How much are you paying your employees? Why are you paying them that salary? What benefits or bonuses do you offer? This information needs to be documented in a spreadsheet or using software that offers visual analyses.

A major consideration is your company’s budget. Have a conversation with your finance team to understand what percentage of your expenses goes to payroll. You may be on track, have room to offer more, or be spending more than you have.

You also want to ensure that you’re offering equal pay for equal work. Be careful when paying someone in the same position less or more than someone else. There should be an obvious and genuine reason for a difference in pay. Discrimination based on variables such as gender and ethnicity can quickly land you in trouble with pay equity laws.

Understanding Market Pay Rates

When building fair and competitive compensation plans, you also need to do your homework. The way your competitors are paying their employees is vital to consider when hiring for a role. What’s more, market pay rates are constantly shifting for various reasons. To keep up to date, you’ll need the right resources.

These resources can guide you in making wiser decisions that are equitable and competitive in today’s job market:

• The Bureau of Labor Statistics (BLS) offers reliable insights and surveys into US salary averages and trends based on positions and locations.
• Job Boards provide vast search results that you can sift through to extract relevant salary details based on job descriptions, locations, or companies.
• Career sites like com have job listings and salary estimates based on various variables that contribute to compensation packages.

Review information from these reputable sources and compare them to the roles and job grades in your organization. This can help you understand whether you’re paying comparable wages or if you should be making compensation adjustments. Review the surveys and benchmark information regularly to keep up-to-date with market pay rates.

Reasons for Wage Differentials

If you find that your compensation packages vary from others in your industry, don’t panic! You don’t need to change everything just yet. There are certain wage differentials to consider. Sometimes, there are good reasons for paying more or less than the average of your competition.

• Company size and budget – the ability to offer higher salaries is a privilege that bigger companies can utilize to attract top talent
• Same job title but different responsibilities – jobs often hold the same title but the actual day-to-day activities vary depending on the company and employer
• Cost of living – geographical and cost of living considerations will dictate necessary base salaries and benefits to manage them
• In-demand skills – a company may be in desperate need of a certain skill and be willing to pay more than usual, driving averages up
• Working conditions – working hours, location, and commute times are all factors of working conditions that will inflate or reduce compensation
• Benefits – some companies offer lower base salaries but make up for the differences in benefits

An accountant in New York City who is required to commute to the office five days a week receives an offer of $78,000. The payroll has 100 staff members. In contrast, an accountant for a company with 20 employees in Philadelphia who can work from home two days a week will be offered $61,000. The responsibilities, company size, cost of living, and commute expectations explain the difference in compensation.

Market-Driven Compensation Choices

Market-driven compensation choices will allow you to benchmark your packages against industry competition and make adjustments as the market changes. The goal is to remain competitive, attract and retain staff, and encourage productivity without breaking the bank.

Start by establishing a compensation philosophy. Will you pay the average, less, or more for comparable jobs in the market? Access surveys and market data that you can align with your organization, industry, and the roles you offer. You’ll want to create pay ranges and grades and be transparent about them with your team. Review them regularly to ensure you’re adjusting to market trends.