By Barry Rubenstein

One of the most fundamental things that employees want/need to know is whether or not they are being compensated fairly. While people’s interpretation of what is “fair” can be quite variable, when companies engage in the process of reviewing market trends related to compensation, your employees will feel more satisfied and retention will increase. The analysis and resulting compensation strategy is one piece of a company’s strategic employee retention program. However, by offering competitive salaries, you will be well on your way to attracting and retaining the most qualified employees for your business.

In order to complete the market analysis, the following things need to be in place:

1. Current Salaries and Job Descriptions: The most difficult part of a compensation analysis is determining whether or not you are making an apples-to-apples comparison. In other words, one company’s interpretation and responsibilities of a Marketing Analyst will vary widely from another company’s – even though the title may be the same. As such, it is critical that you have up-to-date (or close to it!) job descriptions. This clarity enables you to provide rich, accurate data.
2. Access to Survey Data: There are several ways a company can access current salary data. They include: subscriptions, participation in salary surveys (which typically yield a copy of the survey results), and online/free salary data. Let’s talk about these one-by-one: Subscriptions: software packages like the Economic Research Institute’s Salary and Executive Assessor (http://www.erieri.com/) provide outstanding information regarding over 6000 positions. The data can be cut based on position, geography, and industry code. Survey Participation/Membership: another way to access salary data is to participate in salary surveys put out by companies like The Survey Group (http://www.thesurveygroup.com/); AON Consulting (http://www.aon.com/); Watson Wyatt (http://www.watsonwyatt.com/) etc. These organizations provide rich data to you, for a fee that can help you to design your compensation strategy. Online/Free Salary Data: websites such as salary.com (http://www.salary.com/) provide “basic” data on a large number of positions across many industries. However, I would avoid using the basic/free data as my only source. The reason for this is that the data is somewhat limited in scope – i.e. it is not cut by company size, revenue etc – the data is based on national numbers. While useful, the more robust premium services those salary.com offers are stronger bets.
3. Comparisons: Who am I comparing against?: this process allows you to get a good idea regarding what your competitors and other businesses offer as salaries and gives you tremendous insight into what your prospects will be looking for regarding compensation. In order to provide strong comparisons, a good salary analysis will provide up to 3 comparison points which supplies rich data to your company.
4. Importance: A compensation analysis accomplishes several things:
   • Alerts you to what your candidate pool may be looking for regarding salary.
   • Identifies areas where, based on market surveys, you may be under-compensating for a position or set of positions.
   • This knowledge is extremely helpful for salary planning. In other words, if gaps exists, you can develop a strategy that to close those gaps.
   • A secondary gain of the analysis is the development of a “grading” structure that assists in hiring process. A salary grade structure, where positions are slotted in salary bands takes the guesswork out of determining a new employee’s salary range. In addition, the grading structure highlights any issues of internal equity or inequity. Inequities occur when we compensate people with the same or similar titles and responsibilities but for one reason or another, they get paid on significantly different pay-scales. The grading structure puts those issues in front of us and again gives us the opportunity to develop a strategy to resolve those issues.
5. Timing: Ideally, a compensation analysis occurs on an annual basis. However, determining the timeline can relate to some of the following:
   • When was your last compensation review? If your company has gone more than 2 years without reviewing its compensation, I strongly recommend conducting the analysis.
   • Industry volatility. If you see significant volatility within your industry, I recommend managing this process annually – at least until the industry trends settle down. An example of this would the Information Technology industry. From 1999-2001, prior to the “internet bust”, compensation strategies were moving at breakneck speed. Once the bust took place, market corrections were taking place at the same breakneck pace. It is only within the past year or so that the IT industry compensation plans have settled into a more deliberate rhythm.
   • Major Company Events: If your company has recently undergone a merger or an acquisition or is in the midst of downsizing, a compensation analysis would be indicated.
6. It’s not all About the Money!!!

Keep in mind that while employees consistently express the need for higher pay; in the grand scheme of things, compensation is one piece of the puzzle. Don’t lose sight of providing employees with the things employees’ desire most:

1. Consistent performance feedback
2. Recognition for their work
3. Ability to develop their careers

To summarize, all companies want to remain ahead of the competitive curve when it comes to attracting and retaining employees. A compensation analysis, when used as part of an overall employee retention program, is a vehicle that is available to all companies that will help you to reach this goal. If you combine a solid compensation strategy with a strong employee relations strategy you will enhance your position as an “employer of choice”.