Your greatest asset isn’t your processes, your organization, or a mysterious “secret sauce.”

It’s your employees. Chances are, more than 50% of your gross revenue goes to salaries and benefits combined.

How are you spending that money? Are you spending it wisely? Is that money helping to attract and retain the best talent? When it comes to human resources, are you making well-informed business decisions that can help your organization?

A well-designed compensation survey can answer these questions and many others.

Benefits of a Compensation Survey

A compensation survey can provide insights into how your pay scales and other employee benefits compare to your industry, your competitors, and your region. That information can help you make better decisions about your mix of pay levels and benefits to attract and retain key employees. A survey can also outline how employees are paid, such as:

  • The mix between base and variable (incentives, bonuses, commissions, profit sharing) compensation
  • Vesting schedules and eligibility for equity awards
  • Bonus pool funding
  • The appropriate balance between measuring individual and company performance

A survey can also help you evaluate your policies, such as car policies, maternity and paternity leave, shift premiums, and student loan assistance. How do they align with what your competitors and industry are offering? Do they meet the expectations of potential employees? Are some perks that you don’t offer becoming the norm?

Avoiding Liability

One other major benefit of a compensation survey is that it can help uncover pay issues that can leave your organization vulnerable to discrimination claims. The key liability stems from pay equity.

Pay equity can raise serious legal questions for organizations, and it includes compensation paid both to individuals and to groups of employees.

Several laws relate to pay discrimination. The Equal Pay Act (EPA) prohibits pay discrimination based on gender.  Title VII of the Civil Rights Act of 1964 prohibits discrimination based on race, color, religion, national origin and gender. The ADEA and ADA prohibit discrimination in pay against workers on the basis of age and disability.

The Federal Trade Commission’s (FTC) Safe Harbor guidelines state that salary surveys must be conducted, analyzed and disseminated by a third party. All information contained must be historical data that is at least three months old. No future compensation information should be requested or provided. Third-party surveys require the following:

  • All data must be reported in summary form only
  • No data is reported for any job at any level where there are less than five companies matching (three-company limit outside the US)
  • Each participant must select a minimum of 10 companies in their custom peer group report
  • No organization data will represent more than a 25% weighting for any job (35% weighting outside the US)

It is important to look at your compensation data through the lens of these laws to ensure that your pay practices don’t have potential adverse impact.

Components of a Well-Designed Compensation Survey

There are several key points that determine the credibility of a salary survey; these key points can also help mitigate potential liability. This is especially important when using a third party to conduct the survey.

  • List of participants. This will determine the relevance and depth of data for your company. It should include labor market competitors of your talent.
  • Effective date of the survey data. To comply with Safe Harbor Guidelines, the survey should be published at least three months after the data effective date.
  • Relevance of job descriptions to benchmarked positions. High-quality surveys will provide job-matching education and guidance to participants. Look for a good match (at least 70%) between the survey and your company for most positions. Compare job descriptions, not just job titles.
  • Confidentiality. Ensure the survey adheres to Safe Harbor Guidelines.
  • Data validation. Quality survey vendors will contact participants after data submission to confirm and/or correct any potential errors or outliers in the data.
  • Information on “total compensation.” This includes retirement plans, bonuses, incentive and base salaries.
  • Information of changes in the employment market. This information includes high-demand skills or “hot jobs” that are hard to fill, trends in compensation and benefits area, span of control, and average length of service.

In short, continuous benchmarking and evaluation of salary and incentive levels for existing employees will minimize turnover, increase company morale, and improve a company’s bottom line.

The Lindenberger Group has helped organizations in virtually every industry use compensation surveys to attract and retain high-quality employees and to remain competitive. For more information or to discuss your HR needs, please contact us at 609-730-1049 or send us an email.