Are you paying your employees too much – or not enough?

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A 6-step guide to using compensation data to determine pay levels

Designing pay plans that fit with your budget and are also robust enough to attract the right workforce to support your business strategy is a challenging balancing act. However, the right research and preparation will help ensure your compensation strategy is in step with your industry. Compensation data gleaned from participation in surveys is a proven way to make sure your strategy is competitive.

Here are some steps for you to consider to ensure you are optimizing your time and spend on compensation data.

1. Understand your data needs

As you begin the compensation planning journey, take some time to assess your data needs so that you can know what type of information will make the most sense for your organization.

For example:

  • What are the current talent issues most pressing to your specific organization or industry? (Consider attraction, retention, cost control, union/works councils, the gig economy, aging workforce, etc.)
  •  How would you describe your current compensation/rewards philosophy and strategies? Have they been effective in the past or do they need some reshaping?
  • What do your employees think about how they are compensated? Have you done an internal survey to find out?
    Gaining a solid business context will help you identify the most relevant data for your needs as well as recommendations that are applicable to your business.

2. Determine your benchmark jobs

One of the most challenging aspects of determining employee compensation is categorizing your positions so that you can compare skill sets, experience level and compensation relative to your competitors. Benchmarking lets you establish anchor points that represent the depth and breadth of the positions across your organization so you can match them to industry standards to make sure you are compensating competitively or in line with the market.

For example, some common benchmarks for deciding executive pay include:

  • Chief executive officer
  • Chairman of the board
  • Vice chairman of the board
  • Chief operating officer

Titles alone are not sufficient benchmarks, you will also need up-to-date job descriptions that outline specific duties for each position as these can vary among organizations.

3. Define talent market criteria.

A talent market is where you compete for, recruit, and unfortunately, lose employees. You need to fully understand each talent market in which you compete in order to recruit and retain the best from each.

Talent markets may be grouped by:

  • Industry (general)
  • Size of company
  • Job title
  • Job level or “band”
  • Skills
  • Geographic area
  • Worker classification (full vs. part-time)

The more specific you can be about each talent market, the easier it will be to discern pay practices or rates that are comparable.

4. Compare against industry research

Completing the three steps above will ensure you are prepared to review your job functions against external research to help you identify appropriate pay grades for your key positions. Once you understand what data you need, your job benchmarks and the criteria you wish to compare against, you can consider offerings from various data vendors.

Here are some things to consider when choosing compensation data source:

  • Reliability — Is the survey administered by a reputable third party? Is data submitted by compensation/HR professionals? (i.e., not self-reported data)
  • Robustness/sample size — Are there enough relevant companies in the survey? Is there enough data reported to be comparable?
  • Timeliness of data — When was the survey data collected and published? (Surveys more than two years old may no longer be meaningful.)
  • Pay elements — Does the survey include the data elements you need? (Base pay, total cash, long-term incentives, total direct compensation, etc.)
  • Talent markets — Does it cover your relevant talent market(s)? (Industries, geographies, etc.)
  • Scope of data — Are the available benchmarks relevant and robust?
  • Job descriptions/survey methodology — Is there enough information for you to match your jobs? How is the information obtained?

5. Evaluate vendors.

In addition to evaluating available research, it’s important to compare vendor companies against the software and services they offer, along with the investment required.

Here are some things to consider when choosing a vendor:

  • Does the vendor’s software offer deep functionality?
  • Can it integrate with other software modules?
  • Is support available for assistance with job matching and survey submission?
  • Is data interpretation advice offered to clients?
  • Does the total spend on compensation surveys seem fair, relative to the perceived value?
  • Are there opportunities to streamline or consolidate your survey data spend or get more value for your spend?
  • Are discounts available for purchasing data across multiple surveys or countries?

6. Source and collect your survey inputs

Now that you’ve defined your research needs and chosen a vendor, it’s time to submit your information via a compensation survey in order to receive an industry report aggregating all of the participants’ responses to that survey.

Here are some actions you can take to ensure you have all the information you need to complete a standard survey submission:

  • Compile incumbent compensation data (including salary, bonus, incentives, etc.) against all of the benchmarks and talent markets you selected. (Follow the job matching methodology in your chosen survey to make the best alignment for your company’s job titles and descriptions, i.e., match your jobs to survey jobs.)
  • Source data from your finance department including revenues, assets, long-term incentives, accounting values, etc.
  • Where appropriate, you may be asked to include your organization’s HR policies, benefits design practices, long-term incentive practices, and company car benefits.

At this stage, you’re ready to input your information into the data submission form. Once you complete the process of submitting your first survey, it’s easy to put systems in place to gather the same information each year as most vendors offer annual surveys to stay up to date on compensation trends.

The key to a successful submission

In general, the quality of job matching and data submission is paramount for ensuring high quality results.

Take stock of the most common issues that could hamper your effort:

  • Blank fields or incomplete submissions
  • Missing base salary or job matching information
  • Incomplete revenue, geographic data or other scope data
  •  Inaccurate annual incentive or long-term incentive grant data

Guidelines for a Successful Compensation Survey Submission

Report individual lines of data, all possible jobs, internal grades and titles, all required fields/elements. Do Not Report Employee personal data, average data, contract and temporary staff not paid on same terms as full time. If you determine that 80% or more of job content is similar the match is a quality match. Keep the following guidelines in mind: 1. review all definitions & descriptions before matching jobs 2. Submit data for all incumbaets who can be matched to hte survey 3. review survey methodology to ensure consistent alignment of jobs 4. Complete all required fields 5. review data before submitting to ensure it is in compliance of guidelines

Follow the above guidelines to prepare your data and avoid these common submission pitfalls so you can maximize your investment in survey data. With the nature of work changing so rapidly, you’ll want to make the most of compensation data to help ensure you’re not paying your employees too much — or too little.


Alison Humphrey Senior Rewards Consultant at Willis Towers Watson

Mollie Saunders Senior Rewards Consultant at Willis Towers Watson

Alison Humphrey and Mollie Saunders are Senior Rewards Consultants at Willis Towers Watson.

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