Whether you do annual pay reviews or take an ad hoc approach, at various points of the year you need to check in on your organisation’s salaries and make sure they’re still in line with the market – otherwise you run the risk of dissatisfied staff jumping ship for a better offer. That’s why, when you start your pay review process, the first step is market research.
In the first of our multi-part guide to pay reviews, we’ll cover everything you need to know about carrying out market research – so you can avoid common mistakes, fast-track the process, and make better decisions about pay.
How do you choose the right source of salary data?
1. Enterprise-level salary surveys
When you’re doing market research into pay, one common option is to use the services of someone like Willis Towers Watson or Korn Ferry. These major organisations offer extensive, detailed, and global compensation data – offering you the peace of mind that the market insights you’re getting are reliable enough to base your pay decisions on. The downside? That data doesn’t come cheap…
Pros:
- Extensive data sets
- Accurate and reliable
Cons:
- Very expensive
- Not linked to your data
2. Industry reports
Often favoured by those who only carry out annual reviews, another option is purchasing an industry report. Provided by organisations like SHRM, these will focus on compensation data and insights for a specific sector so you can make useful comparisons. They’re thorough and highly relevant, but they are a snapshot in time – plus you’ll need to link their data to your own manually.
Pros:
- Highly relevant
- Neat delivery of data
Cons:
- A moment-in-time snapshot
- Not linked to your data
3. DIY using free data sources
For small-to-mid-market organisations, there’s not always a big budget for pay review exercises. So HR professionals often turn to ‘DIY research’ drawing on a range of sources. This could include government data on salaries, websites like Glassdoor that offer user-reported salaries, or job listing sites like Indeed – including looking at the actual salaries competitors are advertising. It’s a cheap option, but there are quite a few drawbacks to note…
Pros:
- Inexpensive or free
- Tailored to your needs
Cons
- Highly time-consuming
- Unreliable or inaccurate data
4. Dedicated compensation platforms
Another option is using a platform that’s dedicated to salary benchmarking and compensation reviews. Ravio and Pave are two examples of this – products which exist just to help you benchmark compensation, and make pay decisions. However, these examples only use customer data and are specific to tech organisations…
Pros:
- Cost-effective – can be used multiple times
- Tailored specifically to the task at hand
Cons:
- Not all industries are covered
- Only uses their customer data
5. Compensation IQ by Qlearsite
We may be biased, but our preferred option is using Compensation IQ – that’s our product, designed to help you simplify salary decisions. It automatically analyses your compensation data, just by connecting with your HRIS, and maps it to industry and role-specific benchmarks. Not only that, it shows you broader market trends and insights – both in a clear, easy-to-read headlines page, and via a ready-to-use data download.
Pros:
- Affordable & always ready to use
- Reliable, relevant data to base decisions on
- Easy to use platform – no data wrangling!
- Sharing and collaboration tools
Cons:
- Again, we’re biased – but none!
What should I factor into my market research?
- Industries: different sectors have different budgets, and different priorities when it comes to their remuneration. For your market research into pay to be accurate, you need data sources that are industry-specific.
- Geography: Generally, jobs in London pay more than Manchester. And city-based roles tend to have higher wages than in villages, for example. Geography really matters when it comes to salary benchmarks.
- Pay trends: Salary benchmarks are not static numbers. Societal events and industry shifts will affect pay in a multitude of ways, so you need pay data that will consider and reflect any changing trends.
- Competitors: As well as considering industry benchmarks, you might want to factor in what your direct competitors are offering. After all, they’re the most likely to poach your current talent.
- Data accuracy: Beyond all the nuances of the pay data you need, the other essential is making sure the data is actually reliable. These are big, life-impacting decisions you’re making – so they need to be based on fact.
Potential pitfalls to avoid when researching salaries
Market research really matters, when it comes to your compensation review. But there’s a lot of potential risk areas to avoid, because getting it wrong can have major consequences. After all, you’re trying to keep everyone happy – leaders, line managers, and employees – and they have their own priorities. So here’s some challenges to be aware of:
1. Inaccurate data
- Sample size limitations: If you haven’t got enough pay data, or it’s restricted to just a few companies, you won’t have a representative sample.
- Outdated information: As we said, salaries aren’t static. If you use outdated benchmarks, you might be using numbers which were relevant several years ago.
2. Inexperienced data analysis
- Inaccurate interpretations: Not everyone’s a data scientist. It’s easy to misunderstand what the data is saying, especially if factors like industry aren’t considered.
- Not normalising the data: Depending on your sources, the data you collect will need to be ‘normalised’ for things like experience level, role, and geography.
3. Wasted time and money
- Market research costs: As we discussed above, many methods of salary benchmarking cost you in time, money, or both – hard, when budgets are tight.
- It’s not a one-off: Compensation benchmarks are constantly changing, so take all that wasted time and money and expect to spend it again, and again, and again.
4. Missed market shifts
- Being aware of trends: Your DIY market research could mean you don’t factor in industry trends and market shifts, especially ones related to ‘perks’ like remote work.
- Going beyond salary: When you do your own research, it’s hard to factor in non-salary factors like bonuses and perks so you don’t get a full picture.
5. Unbalanced comparisons
- It’s apples and oranges: Without a proper approach, you risk comparing job titles that aren’t actually equivalent. After all, every organisation is structured slightly differently.
- Industry variances: Again, different industries will reward the same roles differently. It’s essential you factor in your specific sector, or you’ll be making bad comparisons.
6. Underpaying and overpaying
- Underpaying staff: If you underpay your employees, a lot can go wrong. They’ll disengage, they’ll underperform, and they’ll end up leaving your organisation.
- Overpaying staff: There’s also the risk of overpaying staff. If you can afford that, fine! But you don’t want to overstretch your budget, and leave no room to grow.
7. Barriers to decision-making
- Delayed answers: If your market research takes too long, you’re delaying your pay review process – and that can impact budgets, retention, engagement, and more.
- No alignment: Part of the exercise is presenting your pay research to stakeholders, like leaders and line managers, so you need to find clear answers. And quickly!
Why try Compensation IQ?
There’s a lot that goes into the market research stage of your pay review process. And there’s a lot that can go wrong with salary benchmarking.
That’s why Compensation IQ exists – to make this stage completely painless. All the market data you need, mapped to your own salary data. Accurate, regularly updated, relevant, and easy to understand. And we’ve made it easy to share with stakeholders, thanks to an easy-to-read headlines page, an auto-analysed spreadsheet, and a ready-to-share board pack.
If you think Compensation IQ could help you, why not try it out? We’re offering a 7-day free trial, so you can see for yourself:
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