Salary surveys: What managers need to know

BY MEMORY NGUWI

A salary survey is a process by which internal job descriptions are matched to external jobs with similar responsibilities to identify the market rate for each position.

Failure to remunerate employees comparably leads to failure to attract key talent, as well as an exodus of your employees to your competitors. Therefore, your organisation must ensure that its salaries are comparable or better than what competitors are paying.

There are two kinds of salary surveys: generic surveys and customised surveys. Generic surveys can be described as off-the-shelf surveys presented in generic job titles and job grades that apply across the board.

Customised salary surveys, as the name suggests, are conducted by a remuneration expert with specific terms of reference written by the client. There are pros and cons to each of the survey types.

Generic surveys are readily available. This means that for a quick board meeting, you can easily request one and get the salary information you require.

However, generic surveys may include companies that may not be comparable to yours. As such, the reliability and relevance of the results may be questioned.

Customised salary surveys on the other hand are very specific to your organisation. The survey targets companies you want to be included in the sample, job titles you want the survey to cover and the benefits you are interested in. Furthermore, you can quantify the risk of losing your employees and how much it will cost your organisation if you are to match the salaries which your competitors are paying without extra work.

However, customised salary surveys take time and you do not have any guarantee that your chosen comparator organisations will participate in the survey.

You need to interpret salary survey results carefully. Some jobs are restricted to one industry while others, especially those in support functions such as marketing, human resources, administration, etc. are found across the board.

For positions specific to one industry, you should benchmark salaries within your industry but for those that are found across the board, it is prudent that you benchmark against a sample that includes several industries. For each job title, make sure that it has been benchmarked against at least five other similar positions. The sample size of five here is given as a rule of thumb. For positions where there are a lot of incumbents e.g. miners, a relatively larger sample size is required.

If the sample is constituted with good comparator organisations and if it is of the right size, the next step is interpreting the salary survey results. Any statistician will tell you that the average is sensitive to outliers. This means that a single organisation that pays extremely high or extremely low salaries will distort the results of the survey and mislead your decisions. This is where percentiles come in. They take care of outliers, as well as provide you with a pay policy line.

Many organisations choose as their pay policy lines, the market 25th percentile (lower quartile), market 50th percentile (median) and the market 75th percentile (upper quartile). For example, an organisation paying salaries that are at the market 75th percentile pays its salaries that are better than 75% of what other organisations are paying. It is important that you compare your salaries against market salaries taking into consideration your organisation’s pay policy line.

For organisations not on the Total Cost to Company Model (TCCM), {where all employee benefits are lumped up into one cash amount for each employee}, one needs to know how much they should give their employees as allowance.

The questions to ask are as follows: How many organisations provide this allowance? Does the amount given as the allowance increase as you move from non-managers to managers? Is this allowance given as a necessity for work?

If the allowance includes dependents or beneficiaries, how many are included and to what extent are they included? If the allowance or benefit is a non-cash allowance (e.g. company vehicle), what is the value attached to that benefit?

If a company misinterprets salary survey data and ends up awarding salary adjustments without fully understanding the data or the consequences, it can lead to the organisation not being able to sustain the salaries awarded.

Nguwi is an occupational psychologist, data scientist, speaker and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm. — mnguwi@ipcconsultants.com or websites https://www.thehumancapitalhub.com/ and  www.ipcconsultants.com.