The Great Resignation has employees and employers alike reassessing how they approach compensation. Now’s an excellent time to review whether you’re paid competitively by your employer. But where to start?
First, let’s discuss data. Catapult’s 2021 NC Wage & Salary Survey reveals that 60% of organizations indicate their pay philosophy is at-market-rate while 12% report they pay above market rate. That means most organizations intend to pay employees comparable to (or better than) other organizations for similar types of work. This philosophy helps businesses recruit and retain the best talent.
If you’re planning to discuss your wage with your employer, know that employees should follow the same steps as organizations to determine if they’re being compensated properly.
Step 1: Review Your Job Description
Title matters far less than job function, so keep your skills in mind. I work with some companies that get caught in compensating for titles, and while company culture or client-facing perspectives matter, titles should correlate little to pay. (Tip: Ensure your job description accurately describes the essential functions, responsibilities, and requirements you perform!)
Step 2: Compare the Data
Find comparable descriptions in at least three statistically sound compensation surveys. You can use the Department of Labor’s complementary compensation data on O*NET Online. Also refer to associations, industry groups, or paid compensation sources. Be cautious about data that does not include a description or survey methodology explaining how and when the data was collected!
Step 3: Do the Math
Any survey data you reference should be averaged to determine a market rate. Use this rate to divide your annual salary by annual market average. This is called a “compa/ratio.” Compensation analysts use these ratios to identify jobs that are underpaid, matching, or overpaid compared to the market.
How do you use a compa/ratio? Pay best practice should fall within 20% of market price, so a comp/ratio of .8 to 1.2 is competitive. A compa/ratio of 1.0 is perfectly aligned with the market.
Keep in Mind
Catapult finds that 83% of employers calculate increases against an employee’s base salary while 17% calculate against the range midpoint. Since most employers want to match or exceed the market rate, those midpoints should align. Remember: If your comp/ratio is below market and your increase is calculated using your current rate, you could receive a pay increase and still fall below market!
It’s always important to know what your skills are worth, and your employer should know how their rates match up so they can stay competitive. Use this data to advocate for your compensation properly and to help your employer stay up-to-date in your industry.
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