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3 37482 Whitepaper PayScalePerformCompensationBenchmarking PDF
3 37482 Whitepaper PayScalePerformCompensationBenchmarking PDF
In our current market, potential hires are more informed than ever about the market rate of their
position’s salary. They weigh their decision based on salary, benefits, location, commute time,
education programs and opportunities for advancement through easily accessible online data
sources.
To compete for talent, your organization must also know what the market is paying for certain skills
and develop fair and reasonable salary ranges for the positions in your company. This combination
of compensation benchmarking followed by setting or updating salary ranges helps you attract and
your sources for current, market salary information. You want the data to be specific to your
industry, geography and type of organization. And, your goal is to benchmark 75-80 percent of
your positions so the data must also cover a variety of skill sets, experience levels and educational
• Published, Traditional Surveys - These come from the government, associations or consulting
firms and offer a broad perspective, though they may not be entirely up-to-date or match your
• Online Data and Software - There are now online resources that offer self-reported salary
data from employees. These sources are very timely, easy-to-use and more cost effective than
• Custom Surveys - Several firms are available to custom design a survey just for your business.
These types of surveys are often very accurate and very expensive.
It is recommended that you use at least two to three different salary data sources when setting
salary ranges to ensure accurate results, unless using an online data source like PayScale.
Next, no matter how enticing a premium, custom salary survey sounds, you must keep your
budget in mind. Price is important so you want to make sure you’re getting a good value. High cost
does not always equal high value. Beyond just what you are directly paying the survey company,
you must consider indirect costs, such as the time for your own company’s participation in a
traditional survey. One way to break down the numbers is to estimate and compare the cost of the
survey per positions matched in your company.
You will have remaining positions in your company that will not be benchmarked externally. What
should you do with non-benchmark positions? Don’t force matches to market data for non-
benchmark positions. Instead, use your job evaluation tool to slot the position within a pay grade,
or use your own internal assessment of comparable positions within your organization with similar
skill, scope, decision making and responsibility.
Aging Data
2.9%
Buyer II 12/2/12 6/2/13 1.47% $38,500 $39,064 $41,000 $41,601 $43,000 $43,630
Marketing 12/2/12 6/2/13 1.47% $31,000 $31,454 $32,000 $32,469 $33,000 $33,484
Coordinator
3. Calculate the portion of the factor to use based on the effective date.
Another calculation to include is weighting your sources. If certain sources are likely more accurate,
you want to make their data have more influence over the final salary ranges you come up with.
You can weight different sources more or less than other sources on a position-by-position basis.
For example, if you have an industry specific salary source, you may weight your data more heavily
for that survey for positions that are highly influenced by industry. You can weight your sources
with the following steps:
Here are some basic guidelines for matching the survey data to your organization:
• Look at the scope. When looking at the requirements of the job position you’re matching, some
specific factors to consider are who the position reports to, education and experience level
needed and decision making required.
• Decide how to handle leveling within your organization. Are you going to benchmark one job
within the job family to external market data and then build an internal range for the additional
levels, or will you price each level of the positions against market data? You’ll want to choose
based on whether you want to put more emphasis on maintaining external equity or more
emphasis on internal equity.
• The size of the organization. Generally, the larger your organization the more pay grades you
may need.
• The vertical distance between the highest and lowest level job. For example, do you have
positions that range from minimum wage to $500,000 a year, or is the distribution of pay across
your positions more homogeneous?
• How finely the organization defines jobs and differentiates between them. If you don’t have your
jobs specifically defined, you may want to have fewer, broader ranges instead of many narrower
ranges.
• The pay increase and promotion policy of the organization. If there are many opportunities for
employees to be promoted to different levels, then you will need more pay grades, but if your
organization has employees with longer tenure in their positions, then you want to have fewer
pay grades.
The market midpoint is the median value of the aged, weighted market data for the position or
positions. It is useful to find because it will eventually help you set your minimum and maximum
salaries for a particular pay range.
To find the market midpoint you average the market data for all the positions within the pay range.
Be mindful of any data points that would be considered an “outlier.” This would be a data point that
significantly changes the value of the mean.
First, the number of years a person typically spends in a position can affect how wide the range
needs to be. After a number of cost of living and merit increases they will be over the top of the
range if the range is too narrow. Second, you want to consider how long it takes the typical person
who is new to the position to reach full proficiency. Reaching full proficiency, or what is called “job
rate,” can vary from position to position, but the range should be wide enough that someone does
not reach the midpoint until they can be characterized as fully proficient.
Keep in mind that there should be overlap between pay ranges, which makes it possible for an
experienced person in a job in a lower grade to be paid more than an inexperienced person in a
higher job.
• For example, if your midpoint is $30,000 and you want your width to be 40%, then you would
divide $30,000 by 1.20. This equals $25,000. $25,000 is your minimum for the range.
• For example, if your minimum is $25,000 and your width is 40%, then you would multiply
$25,000 by 1.40. This equals $35,000. $35,000 is your maximum for your salary range.
For the examples above, your full salary range would be $25,000 - $35,000 with a midpoint of
$30,000.
First, double-check that the job position is assigned to the right pay grade. Second, do not include
market data in the calculation of the market midpoint. Third, assign employees in this “hot job” to
the appropriate pay grade, but develop a special market premium range for these employees. For
example, if the average of the market data for the “hot job” is 20 percent above the market rate for
To cut HR costs and save significant time and money in 2013, you must have accurate
compensation data that reflects real-time market rates and truly matches your organization and
your employees.
PayScale administers the largest, ongoing online salary survey in the world. PayScale’s unique
search technology enables you to instantly find salary data that matches your company and your
positions. With access to 36 million current salary profiles, it has never been easier to find accurate
information to help you reduce HR costs.
Total Cash Compensation 95% $95,517 $73,289 $84,459 $95,355 $106,898 $120,803
Base Salary - Your Search $89,779 $69,453 $79,902 $89,785 $99,644 $110,748
E-Commerce, Business to Consumer (B2C) $90,518 $70,286 $80,598 $90,452 $100,572 $112,409
Internet and New Media $91,374 $72,862 $82,277 $91,344 $100,533 $110,708
Travel and Hospitality Services $82,605 $62,891 $73,129 $82,686 $91,919 $102,057
Currency: U.S. Dollar (USD)
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