1. INSTITUTE OF MANAGEMENT TECHNOLOGY
PROJECT REPORT
COMPENSATION SURVEYS
SUBMITTED BY:
Vidur Pandit (10DCP-094)
Human Resource Planning | IMT G DCP
2. Table of Contents
Introduction ............................................................................................................................................................................... 3
Compensation and Benefits ............................................................................................................................................ 3
Important of Compensation and Benefits ................................................................................................................ 3
Compensation Surveys .......................................................................................................................................................... 5
What are Compensation Surveys? ............................................................................................................................... 5
Objectives of a Compensation Survey ........................................................................................................................ 5
Types of Compensation Surveys .................................................................................................................................. 6
Standard Surveys ........................................................................................................................................................... 6
Custom Surveys .............................................................................................................................................................. 6
Types of data gathered ..................................................................................................................................................... 7
How You Can Make Good Use of Compensation Strategy ............................................................................. 8
Equitable Compensation ............................................................................................................................................. 8
Determining Rates of Pay ........................................................................................................................................... 9
Salary Increases .............................................................................................................................................................. 9
Pay Increase on Promotion ...................................................................................................................................... 10
General Salary Adjustment ...................................................................................................................................... 10
Automatic Salary Progression ................................................................................................................................ 10
Anomalous Salary ........................................................................................................................................................ 11
How to Conduct a Salary Survey ..................................................................................................................................... 11
Whom to Include in Your Survey ............................................................................................................................... 12
Making Contact with Prospective Applicants ....................................................................................................... 12
Compare apples to apples ............................................................................................................................................. 13
Review job descriptions or position profiles in the survey report ......................................................... 13
Note Province and Region ........................................................................................................................................ 13
Note operating budgets of respondent organizations .................................................................................. 14
Note the types and descriptions of respondent organizations ................................................................. 14
Note the education level and status of respondents ..................................................................................... 14
Note the year of data collection and the date of the report........................................................................ 14
Note if the survey is a one-time event or if it's repeated............................................................................. 14
Multiple survey sources ............................................................................................................................................ 15
Number of participants ............................................................................................................................................. 15
Compensation Survey Checklist ................................................................................................................................. 16
Evaluating Its Validity ..................................................................................................................................................... 16
Human Resource Planning | IMT G DCP
3. INTRODUCTION
Compensation and Benefits
Compensation & Benefits (abbreviated “C&B”) is a sub-discipline of Human-Resources, focused on
employee compensation and benefits policy making. It is also known in the UK as “Total Reward”
and as “Remuneration” in Australia and New Zealand.
The area of Compensation and Benefits belongs to the most specialized areas in Human Resources
Management. Compensation and Benefits usually plays the role of the HR Controlling, setting the
rules and procedures around the salaries, variable pay and benefits.
Compensation and Benefits is usually the function of HRM most connected with the competitors on
the market and it sets the compensation policies, which are fully competitive on the job market, but
the policies still meet the targets defined by the organization.
Important of Compensation and Benefits
Compensation is an important motivator when you reward achievement of the desired organizational
results. It is said "that money is a powerful source of motivation." But it is also said that salary increase
can only motivate until the next pay increase is due. Imagine what the impact is if an employee is at the
maximum point of his or her salary range. Achievement of the desired behaviors is important in order to
enhance your organization's effectiveness. In turn, this increases the possibility of success.
Compensation strategy can reinforce the organizational culture that you desire. This is an enabling
organizational culture under which pay is linked to performance.
Human Resource Planning | IMT G DCP
4. Your compensation policy must reflect your strategic business objectives. This becomes all the more
important when determining CEO compensation. You must clearly define the objectives of your
organization so that you can achieve them by using compensation strategy. These are communicated to
everyone soon after a decision is taken. It can happen that good decisions fail to achieve results due to
poor communication. By providing the right combination of benefits which are non-cash compensation
your organization can motivate employees and make them stay to help in its progress.
Human Resource Planning | IMT G DCP
5. COMPENSATION SURVEYS
What are Compensation Surveys?
Organizations have to bridge the gap between the industry standards and their salary packages. They
cannot provide compensation packages that are either less than the industry standards or are very
higher than the market rates. For the purpose they undertake the salary survey. The Salary survey is the
research done to analyze the industry standards to set up the compensation strategy for the
organization. Organizations can either conduct the survey themselves or they can purchase the survey
reports from a reputed research organization.
To determine the prevailing rate for a job, companies can "benchmark" jobs against compensation
surveys that are detailed and specific to the companies' industries and regions. A good compensation
survey uses standard, proven methods of data gathering and statistical analysis to determine how much
companies pay for a specific job in a specific industry. A number of types of organizations conduct salary
surveys, including compensation information businesses, compensation consulting firms, industry
associations, educational institutions, and state and federal governments.
Objectives of a Compensation Survey
To gather information regarding the industry standards
To know more about the market rate i.e. compensation offered by the competitors
To design a fair compensation system
To design and implement most competitive reward strategies
To benchmark the compensation strategies
Human Resource Planning | IMT G DCP
6. Types of Compensation Surveys
Standard Customized
Standard Surveys
Standard surveys are undertaken by organizations on a regular basis. These surveys are conducted
annually based on the organizational objectives. These surveys attempt to cover the same
companies every year and provide the same time of analysis. The reports are published annually by
the research organizations. The organizations willing to formulate their compensations strategies
based on the surveys purchase the reports from the research organization.
Custom Surveys
At times, a few organizations need to know some specific information. The surveys which cater this
need are known as custom surveys. The organizations either higher research organizations to
conduct these surveys for them or they themselves conduct the survey by sampling few of the
Human Resource Planning | IMT G DCP
7. competitors on their own. These surveys do not have any time interval. They are undertaken as the
need arises. They focus on important issues usually one or two.
Types of data gathered
Salary Surveys are analyses of compensation data. This data may include quantifiable aspects of
compensation such as:
Base salaries
Increase percentages or amounts
Merit Increases
Salary Ranges
Starting Salary
Incentives/Bonuses
Allowances and Benefits
Working Hours
Salary Surveys may also include non-quantifiable aspects of compensation such as:
Educational Requirements
Geographic Location
Source of Hire (Internal/External)
Working Conditions
Human Resource Planning | IMT G DCP
8. How You Can Make Good Use of Compensation Strategy
You can use compensation to attract and retain competent people. This objective requires you to offer a
salary that is not lower than the market rates. When you want better customer service, reward
employee behaviors that produce superior service.
Do not harp on the amount of salary you are paying yet at the same expect good performance. Your
people may conclude that there is insincerity on the part of management. Match the written policy with
the right and appropriate actions that demonstrate to your employees that you are a fair and just
employer.
Equitable Compensation
Like employees working elsewhere in other organizations, your people are concerned with
compensation equity. Take this into consideration in drawing up your compensation strategy. When
people notice inequities, their morale and motivation will suffer.
But by adopting a compensation strategy, you don't have to worry about your good people resigning. If
they believe in your management's fair-handedness, it is very probable that they will not go away.
Decision to leave an organization requires considerations other than or in addition to dissatisfaction
with compensation.
Human Resource Planning | IMT G DCP
9. Determining Rates of Pay
Compensation strategy involves considering to adopt any of several ways in setting rates of pay.
Pay increase based on employee's length of time spent on the job. This is seniority-based pay
that is a good motivator in employee retention. But here, you are not rewarding performance
Performance-based pay is intended to motivate employees to perform better.
Such a plan is becoming more common whereby the manager and employee agree on the job
goals and performance criteria at the beginning of a specified period, usually at the beginning of
the year. The effect of this as a motivator can vary from time to time and from situation to
situation
You can give pay increases based on job-related skills and knowledge. This is intended to
motivate your people to gain additional skills, acquire new competencies and knowledge. Under
this method, you do not pay employees for the job they are-doing, their job title or seniority.
This is competency-based pay
Salary Increases
Your compensation strategy needs to align your compensation objectives to your organizational
business objectives. Salary increases are part of this plan. By this, you are recognizing employees’
contribution to the accomplishment of your organization's objectives.
Consider implementing a policy whereby employees are given salary increases when your organization
can afford to give them, in arrears. This ensures that good performers will continue to perform. They
know that they will get what is due to them.
Human Resource Planning | IMT G DCP
10. Giving salary increase to an under-performer is not justified. There are organizations who have
implemented a policy that employees who are in the last five percent of the performance bracket will
have to go.
Pay Increase on Promotion
When an employee is promoted, you may or may not give a significant pay increase. It is not justified to
pay an overpaid employee a significant promotional increase. Consider all relevant matters before you
make a decision. One important thing to consider is the pay parity with people in the same category and
performing similar tasks.
General Salary Adjustment
In performance-based pay, do not give across-the-board increases. Differentiate between outstanding,
average and non-performers. If not, your employees will lose trust in the system, resulting in little or no
motivational impact. Paying the right salary has impact on employee performance and organizational
effectiveness.
Automatic Salary Progression
This has no relationship to performance. Avoid it as it does not encourage your employees to improve
their performance. This is fairly common in the public sector. But there are now significant changes
made in accordance with sound human resource management principles. The only occasion where you
can consider giving some salary increase that is unrelated to performance is in respect of increase in the
cost of living.
Human Resource Planning | IMT G DCP
11. Anomalous Salary
If you have any employee whose salary is below the minimum for the job or too low in relation to the
employee's performance and experience, make the necessary adjustment. This is in addition to an
increase based on performance merit.
On the other hand, you may have an employee who is paid above the maximum point in the salary
range for the job. You may freeze further salary increases until the relevant pay level is reached. Then
give merit increase based on performance. Don't give increase if performance is unsatisfactory.
HOW TO CONDUCT A SALARY SURVEY
Public and private organizations, including nonprofits, nearly all use market parity as a starting point in
structuring their pay systems. Even when these systems are not formalized, decisions about pay are
usually based on some kind of market-based rationale.
Employees expect objectivity and equity in decisions about their pay, and good managers do their best
to meet that expectation. One very important tool to help them determine market parity is the salary
survey.
Surveys can be as casual as a telephone call regarding a single job or as structured as a ten-page
questionnaire sent to dozens of agencies. This discussion covers a middle ground between these
extremes; it is aimed at the agency administrator who is not a statistician and whose experience in
salary administration may be limited.
Human Resource Planning | IMT G DCP
12. Whom to Include in Your Survey
Consider the following in deciding which organizations to include in your salary survey:
•Agency location. Are your interests local, regional, or national?
Surveys on support staff jobs are usually done locally because recruiting for those jobs is local.
Professional or management job surveys are regional or national because that labor market is
geographically dispersed.
•Agency size. Big organizations tend to have more higher-paying jobs carrying more responsibility. Small
agencies often find data from bigger organizations useful, but the reverse is seldom true
•Comparability of agency function or services. Are activities, clients served, and revenue sources similar
or complementary to those of your agency? A nonprofit agency that serves a disadvantaged clientele
and is funded by government grants may have little in common with one that serves the arts and is
financed by private philanthropy
•Public/private/nonprofit boundaries. Do people in your organization have employment alternatives in
other kinds of organizations? If so, you should survey all organizations that demand the same skills that
your agency requires
•Quality of salary management. Is the agency experienced in administering pay? Beware of limiting your
survey to inexperienced agencies; mistakes can be compounded by following poor examples
Making Contact with Prospective Applicants
Never drop a salary survey questionnaire in the mail without first making personal contact with
someone in the prospective participant agency. This should be a person with the authority to release the
Human Resource Planning | IMT G DCP
13. information you want. In small agencies, that will be the chief executive; in larger ones it will be the
business manager, controller, or personnel director. In any case, the questionnaire should be addressed
to an individual who is expecting it and who can act on it. Prior telephone contact is usually sufficient;
explain the purpose of the proposed survey, its scope, and potential advantages to all participants.
Make your appeal on the basis of helping all participants solve common questions about salaries, not
just on the basis of helping to answer your own questions.
Compare apples to apples
It is important, when reviewing salary surveys, to make sure that you are comparing information that is
similar. Looking at salary and benefits levels in organizations vastly different from your own will not
provide the information you need. Here's what to look for:
Review job descriptions or position profiles in the survey report
It is important to look at job duties and responsibilities not just job title when deciding if salary survey
information is comparable. To be comparable the jobs must have a similar level of responsibility and
range of duties.
Note Province and Region
Appropriate salary comparisons will come from agencies with a similar geographic focus: local, regional,
provincial or national. At the local level, the best salary comparisons will come from other organizations
in the same city or town. Good salary comparison may come from a different city or town with similar
labor market characteristics and a similar cost of living.
Human Resource Planning | IMT G DCP
14. Note operating budgets of respondent organizations
As a general rule larger operating budgets mean higher salaries. Comparable salaries come from
organizations of a comparable size. Size is usually estimated by using the operating budget or looking at
the number of paid full-time staff.
Note the types and descriptions of respondent organizations
Are the functions, services offered, clientele, and sources of funding of the organizations in the salary
survey comparable to your organization? For example, an organization providing childcare services
through provincial funding may have very different salaries than an organization providing parent/child
resources through its own fundraising.
Note the education level and status of respondents
The level of education required for a job and the type of employment arrangement can have an impact
on salaries.
Note the year of data collection and the date of the report
Labor market forces can result in significant changes in salaries in a short period of time. More recent
data will be more useful in establishing current salaries.
Note if the survey is a one-time event or if it's repeated
Surveys that have been repeated provide an added advantage of showing trends in salaries over the
years of the survey.
Human Resource Planning | IMT G DCP
15. Multiple survey sources
As with any form of research, it is important to use multiple data sources to narrow in on the "true"
answer. Relying on a single source can be misleading if that source doesn't perfectly reflect the market
in question. WorldatWork suggests that compensation analysts should use multiple data sources
wherever possible; consulting firms and academics agree. The exceptions come when there is only one
data source, or when there is a spot-on data source, such as a custom survey, that truly describes a
precise market.
Number of participants
Make sure the participants are a good sample of the recruiting market. Generally, eight to ten
participating companies is a good sample for positions below the management level. The sample size
should increase the more senior the positions being surveyed, both to get a good representation and to
allow for more job matches, since each company is organized differently. There could be limited pay
data in some industries, or the available data might not be representative of the industry because of a
low participation rate in the survey.
Some firms reveal a list of participants, or at least those well known within the industry. The surveying
company may disclose big-name participants to draw more interest from smaller companies. A list of
major employers can also add credibility to the survey.
An important exception to note is that if a compensation analyst or compensation consulting firm is
using multiple surveys to produce their own derivative market numbers, they will aggregate the data by
combining the surveys, placing differing weight on different sources and sometimes even making a
qualitative adjustment. When the data has been aggregated in this manner, it is not customary to report
numbers or names of participants.
Human Resource Planning | IMT G DCP
16. Compensation Survey Checklist
Here are some considerations to weigh for a company who is deciding whether to purchase a
compensation survey.
The background of the survey research firm and cosponsors, if any
The scope of the survey
The survey methodology
The number of participants in the survey
The names of participants
The number of incumbents covered by the survey; and the sample size for each salary
The relevance of the job descriptions to the positions being benchmarked
The effective date of the survey data
Evaluating Its Validity
It’s important to ensure that the salary survey was conducted in an objective, valid and reliable manner.
What are the sampling frame, sample size and response rate? What is the margin of error? Is it
reported? For information to be valid it has to come from a large enough sample size. For example, if
you collected just three salaries for the same position and one salary is high, one is low, and one is in the
middle, you wouldn't be able to conclude much because your sample is too small to provide valid and
useful information. You also want to be sure that the information is reliable. Reliability means that the
survey gives consistent results. You should therefore carefully consider how the information is gathered
and decide if it makes sense to you. For example, if the survey instrument is included in the report,
assess if it would be easy for you to give accurate answers to the questions.
Human Resource Planning | IMT G DCP