How to Determine a Jobs Market Value

How to Determine a Job’s Market Value How to Determine a Job’s Market Value How to Determine a Job’s Market Value Rossheim, Senior Contributing Writer When its time to make an employee an offer,many small and midsized companies find themselves at a loss about calculating employee compensation for a new or vacant position. Without a bona fide compensation expert in-house and lacking information on salary and benefits trends,and not knowing how to estimate employee compensation, they sometimes resort to guessing games based on insufficient data of questionable quality. This is likely to put them at a disadvantage when negotiating compensation. Many clients say, I dont know what I need to be paying, says Barbara Schneider, director of staff sourcing for Oasis Outsourcing in Jacksonville, Fla. Often a client isnt offering competitive pay. What can companies with tens or hundreds of employees do to ensure that theyre setting salaries that will bring in and keep the best possible talent, without overextending? Weve asked a few professionals who deal with these issues every day. Typical Approaches, from Random to Research-based Companies with fewer than 1,000 workers often take one of three approaches to jobsalary, according to Al Lee, director of quantitative analysis at PayScale in Seattle. Employers may ask a recruiter what the most recent hire into a similar position was offered, or they might simply choose a dollar figure, based solely on anecdote and instinct. In other instances, they may look at compensation data from a broad range of sources to find an average salary from the Bureau of Labor Statistics, to free or inexpensive resources like some of the information on Salary.com or PayScale.com, or they may use survey reports from major HR consulting firms that may cost thousands of dollars. A lone recruiters anecdotal experience, however pertinent, is unlikely to provide broad enough information about labor statistics and trendsand compensation planning. Executives who depend on this information risk poor hires on the one hand and excessive labor costs on the other. The disadvantages of the second approach, essentially pulling a number out of the air, seem obvious.But this road is taken by many executives at financially strapped firms. If you set a fixed salary for a hire, with the attitude of Well get the best techie that can be had for $40,000, you may end up paying too much, especially if all you need is someone to set up and maintain a simple PC network. But setting an arbitrarily low starting salary, even in an economy threatening to workers, carries its own risks. At any price point, you can always get somebody, but they may not be able to do the job, says Lee. Dig Deep for Meaningful Data The most prudent approach is based on research involving, at a minimum, hundreds of employers or thousands of workers. Salary surveys from blue-chip consulting firms like Hewitt or Mercer are one avenue, though not the cheapest.Compensation information available online from companies like Salary.comis sufficient for many small to midsized firms. Salary.com has a free offering that gives a really nice range from which my clients can work, says Schneider. When employers do delve into salary data, its important that they go deep enough to emerge with a well-rounded perspective, according to Susan Schoenfeld, senior legal editor at Business Legal Reports in Old Saybrook, Conn. Many times small and midsized employers use generic numbers and get scared, says Schoenfeld. But if they drill down far enough in the demographics of their labor market, theyll probably find that they dont have to pay as much as they feared. Interpret Data in the Context of Your Organization Some recruiters like to supplement their broad-based salary research with anecdotes from todays labor market. I sometimes look at to see what real people are earning now, says Schneider. Ill plug in the details and find out what candidates want and what theyre making now. That, to me, is tangible here-and-now information that my clients need. But anecdotal information such as this should only be used together with more broadly based data. Unlike custom research, the relevance of standardized salary reports, whether presented online or in print, is limited by the categories used to create the reports. Job titles and their associated responsibilities are not always consistent across companies, for example, according to a briefing from Salary.com. These sources typically attempt to account for the value of specific academic degrees or other training, regional and local variations in pay and other factors. But they cant capture every variable relevant to every position that comes open. Real-World Caveats for Compensation Research Some experts say that the optimal compensation for a given job cant be determined out of the context of a specific employer. We believe in demand-driven pricing, or setting compensation according to the value of the position in the organization, says Jean-Pierre Sakey, president of Headway Corporate Resources in Raleigh, N.C. And in the real world, to snag who you want, you might feel pressure to extend the salary range with which you began the talent search. You may need to make an adjustment if you want to land a top-ranked individual, says Sakey. But Schneider urges caution to the manager who is making a joboffer to a star or overqualified candidate thats significantly above what incumbents at the same level are earning. If you have several people doing the same job, you have to be careful with issues of discrimination, she says. And of course, extraordinary situations like economicrecessionscancreate large and unpredictable disruptions in pay scales in specific occupations. Some investment bankers and analysts will see their compensation change dramatically, says Sakey. But in general, labor pricing is not that variable according to whether the economy is up or down. Regardless of the economic environment, its important to keep a pay scheme up to date. Once youve set those compensation levels, make sure you reassess pay structures at least every three years, says Schoenfeld. Also watch those annual pay surveys to make sure youre competitive year to year. Payday Knowhow Fact of the matter is, money talksand job seekers are listening. If you overvalue or undervalue a jobs salary, you risk damaging both your business and your reputation, and that can deter potential applicants.Thats why its crucial to stay on top of industry rates, especially forjob titles with a dearth of qualified candidates. Could you use some help with that?Sign up for exclusive https://www.youtube.com/ adviceand well send you the latest recruiting tips, hiring trends, management strategies, and even some awesome deals.Weve got the time-tested expertise, plus cutting-edge technology,to help you determine the right compensation packages to attract top candidates.