3 Pay Problems Most Companies Face And How to Solve Them
Pricing new and highly specialized jobs, salary discrepancies between sources, and making pay adjustments based on mixed rates of salary growth are three common compensation problems many companies are facing. Here's how to resolve them.
Pricing new and highly specialized jobs
New and "hybrid jobs" are increasingly being added to workforces and often include unique and highly specialized IT, marketing, and technical positions (i.e. Social Media Manager). Employers find that current compensation information sources may be limited because do not have specific pay data that directly match the job and are challenged in setting a competitive salary.
Start with existing salary survey data. Look closely at the job descriptions, select those jobs that most closely fit the duties of the job, and blend data from multiple jobs. Because salary surveys report data for benchmark jobs, and not necessarily for very specific positions or job titles, you will probably need to supplement your salary data with some other information.
This information could include a formal job evaluation of the position to evaluate relative worth of the job in comparison to other positions, data gathered in the recruiting process or from external recruiting resources, and even customized surveys.
Salary discrepancies between sources
There are two common issues associated with salary discrepancies between sources. The first is your employee saying they should be paid "x" based on their knowledge of how position is paid. The second relates to finding the going rate for jobs based on either what new-hires are asking for in the hiring process or what your network advises.
With regard to the first problem, salary data has become prevalent on the internet and there is increasing pressure on employers to communicate how and what it pays employees much more clearly than they have in the past. Possible solutions for increasing communication and transparency include:
- One-on-one meetings with employees to discuss pay and/or show them market data
- Communication of your organization's compensation philosophy relative the market
- Use of annual total compensation or total rewards statements
With regard to the second issue, many employers face a conflict where their network of recruiters, competitors, new-hire data, etc. suggests that a position should be paid a certain salary, while published salary data reports a different salary. This discrepancy can make it difficult to discern which pay rate is actually correct.
A good rule of thumb when faced with this issue is to validate all sources of pay data that you are using to make sure they are accurate and reliable. Make sure you are comparing apples to apples. For example, if your published salary data does not include participation from your key competitors with whom you have received feedback on their compensation, you will likely encounter different figures. Also, always trust published salary data more than anecdotal feedback.
Mixed rates of salary growth
Compensation surveys generally show mixed rates of salary growth across different positions. For example, salaries for select IT positions are growing at a much larger rate than some administrative positions.
Add in the issue of fairly modest pay increases of around 3% and employers face needing to stay competitive with pay increases, but also challenges in staying market competitive with certain positions where pay is growing at a higher or lower rate. Here are a couple solutions to this growing problem:
- Separate your budgets for merit/cost of living increases and market adjustments/ promotions.
- Observe market trends in salary surveys over the course of 2-3 years before making market adjustments. If you try to make market adjustments every year, you will face greater challenges.
- Creating ranges for positions to allow for compensation flexibility. This eliminates the need for a specific pay rate per job. Rather, you could have ranges set up for each job or job family.
Valid and reliable salary information has traditionally the best way to combat compensation issues, and still is, but it’s also important remain open to new, flexible, and creative solutions to pricing jobs, dealing with salary data discrepancies, and handling pay increases as new compensation challenges emerge.
View ERC's Wage & Salary Adjustment Survey Results
The survey reports data from Northeast Ohio organizations regarding their actual and projected wage and salary adjustments.