Q&A on pay surveys and pay raises

For employers looking to utilize pay surveys to get market benchmarks, where should they look? Who is the best source for pay surveys? What about employers who already have benchmarks but want instead to implement raises on a limited budget—how should they determine how much of a raise to give for everyone versus how much to only top performers?

These complicated questions can confound even experienced HR professionals trying to implement fair and consistent pay structures and employee raises. During a recent CER webinar, Teri Morning tackled these questions. Here are her answers.

Pay Surveys

Q. Who is the best source for pay surveys?

A.For an average business, consider an automated vendor. They buy every survey under the sun, which allows them to utilize economies of scale such that when you go in and rank your jobs, it will review compared to the data and pick out the ranges for those jobs. It will even let you differentiate for different geographic areas.

Always spend your time on doing the things that are the best value to you, and this is a great example – doing spreadsheets on your own and buying all of that data separately has a lot of potential for error and will take a lot of time, making the cost of doing this the way I just suggested seem low in comparison. This might cost $5-6k. Employees love it when you have a system like that because it demonstrates a commitment to paying them a fair, competitive wage.

Another alternative is to use one of the big surveys, like Mercer. Then you’ll need to compare for your region, and age it for whenever the survey was taken.

Administering Employee Raises

Q. What do you suggest for a merit raise grid if you only have a small overall amount available to give all employees? Should you have a performance band along with a base pay band?

A.I would give enough of a base rate to keep up with the movement in cost of living. Take the money that is left over and put that to performance. That will send a strong message to people that high performance is rewarded.

Q. How do you create a merit-increase grid? How do you determine the base increase?

A.Your base increase is based on market movement of wages, and the profitability of the company. (How much is available and how much the market indicates is needed). And then the company decides how much of that should be given for performance. This should all be based on a combination of philosophy, what performance you want to reward, and how much money is available. Take the percentages against the overall salaries to get the total budget.

The above information is excerpted from the webinar “Pay Grades and Job Value: How to Correctly Assemble All the Pieces of the Compensation Puzzle.” To register for a future webinar, visit CER webinars.

Teri Morning, MBA, MS, SPHR, SPHR-CA, is the president of her own HR consulting firm. She has over 15 years human resource and training experience in a variety of professional fields, including retail, distribution, architectural, engineering, consulting, manufacturing (union), public sector and both profit and non-profit company structures.