Pay Data: The right version of the truth?
Selecting the right pay data to benchmark jobs in your organisation can be challenging at the best of times. At a minimum, there are several questions that you need to ask yourself before embarking on a pay benchmarking exercise.
- How many and which data sources do you use?
- How much should you spend on data sources?
- What happens if you have quite specific or unique jobs in your organisation that probably won’t be covered by a ‘typical’ salary survey?
- Is it better to use pay data from a recruitment website where the data is updated constantly, but based only on job titles?
- Or do you choose an established survey provider with an extensive participant list and a robust job matching methodology, but where the data could have a significant time lag?
These are some of the questions we are asked by our clients daily, and as we continue to move cautiously out of the pandemic the importance of ‘getting pay data right’ has never been more important. In a relatively short space of time, we have all probably heard so much about the ‘Great Resignation’, not to mention the cost implications for organisations every time they need to recruit. Figures of up to £25,000 for each new employee hire are being reported in some quarters.
How do you choose the right data?
How then, do you make sure you are selecting the right pay data and more importantly, how do you interpret what the data is telling you in a meaningful and logical way? For example, we are seeing an interesting picture emerge this year as some pay surveys have reported a drop in their reported 2020 salaries. How can salaries be falling at the same as clients are telling us they are losing employees to organisations offering bigger salaries, among other enticements? What are we supposed to believe?
A change in the composition of the survey sample is the likely reason for some of the lower 2021 salaries, although that does not necessarily help organisations looking for relevant, reliable, and up-to-date pay benchmarking data right now. Therefore, what can you do to help take some of the pain out of pay benchmarking? Some of our main recommendations are as follows:
- Be very clear about the scope of your pay benchmarking exercise. Are you wanting to cover jobs across the entire organisation? Or are you wanting to focus on a specific business area or group of jobs? Establishing the parameters for your pay benchmarking will help determine whether you should go for a sector-specific pay survey, or something more generic, such as a General Industry survey. Alternatively, you might decide to go for a combination of sources to ensure you are covering all bases.
- What is more important: extensive coverage in terms of participant lists and data coverage; or pay data that is much more immediate, but its robustness may be compromised? In some industries – for example, Hi-Tech, Digital – being able to access timely pay data is key. Some of our clients working across these sectors prefer to access free pay data from recruitment and related websites such as Glassdoor, rather than go to one of the bigger data houses where annual surveys have a time lag of perhaps six months or more. There is inevitably a trade-off here – pay surveys from the larger data houses are usually far more rigorous in terms of their data coverage and how they have been put together. However, surveys of this size and scope take time to produce. In contrast, salaries posted by individuals on Glassdoor and similar websites are analysed by job title rather than size and scope of the job which makes it difficult to be sure that you are comparing like-for-like jobs. It also helps to explain why salaries posted on recruitment sites can sometimes show some very wide salary ranges.
- How much should you spend on pay data? There is no easy answer to this question. Sometimes the amount will be pre-determined by your allocated budget. In some situations, you may have a healthy amount to spend on pay data, but this could also mean you have too much choice. A starting point here is to get some insights on different survey samples. Who do you see as your main competitors? Where do you recruit from? Where do you lose people to? Are these organisations included in the survey samples of your preferred providers? Being able to answer some if not all these questions will help you decide on the data sources you want to use.
- What happens if you don’t believe what the pay data is telling you? This is a common question that we hear from our clients, and one of the reasons why it is often advisable to consider more than one data source. In the current climate where some pay surveys are reporting lower pay figures compared to previous years, it may be advisable to look at additional data to give you a more rounded view of the market. Alternatively, you might want to take the approach of looking at different sources for different jobs, which might include something more bespoke and tailored towards your sector e.g. a pay club survey. Depending on how the club survey has been set up, this approach can provide you with data that is very focused and relevant for your organisation and sector. However, pay club surveys can be expensive and time-consuming to set up and maintain, so any decision to use this approach should not be taken lightly.
There is a whole raft of reasons why employees decide to leave organisations and pay is only one of them, particularly within the context of a seismic event like Covid-19 that has seen so many re-evaluate what is important for them both professionally and personally. Nonetheless, pay remains an important influence for individuals, in both helping them decide whether to stay with their current employer and when searching for a new role. A recent survey undertaken by recruitment firm Randstad, and based on information from 6,000 UK candidates, reported that salary was at the top of the list of the most influential factors encouraging people to stay in their current job, mentioned by 21% of respondents to the survey. Equally, ‘an attractive salary’ topped a list of five key considerations for employees when they were searching for a new role.
As the importance of reliable pay benchmarking remains sharply in focus, Innecto is here to help you navigate this challenging area of Reward. If you would like to discuss further, please email me (firstname.lastname@example.org) or call our consultancy office on +44 (0)20 3457 0894.