As employers begin thawing their salary freezes, there’s a tendency to simply grant across-the-board increases to everyone. Or worse, anecdotal information or “free” salary market data are used to adjust pay rates. Beware!
Recently, various compensation trend reports indicate 2011 merit increase budgets are expected to be between 2.8 and 3.5%. What does that mean to an employer? Not much. If raises haven’t been given for two or more years, or salaries have been below market rates for several years, the company’s pay rates may well be severely under market for many, if not all, positions. It also depends upon the particular position, industry, and other specifics.
Two questions to consider. What is the relevant current labor market pay for the position? And more importantly, how much would it cost to replace the employee in that position?
Consider several factors when using “market data”. Has the data been gathered by a respected firm and accurately matched to the appropriate positions (level, years of experience, etc.)? Who reported the data–is it employee reported or employer provided? Has the data been scrubbed and validated by a survey provider well respected for its process and reporting? Good market data meets all these criteria and is NOT free. However, it is a wise investment for a company to make.
All data is not created equal. It is essential that you base your compensation decisions on the highest quality market data to ensure you attract and retain the best talent you can afford.