Every compensation data source or salary survey used by an employer is imperfect.
It would be great if the data set that the salary survey is based on was 100% representative of an employer’s competition for talent. But realistically, a good salary survey is reliable, valid, and has most but not all of your competition listed on the participant list.
Remember that salary surveys only represent a sample of the market.
What is statistical reliability and validity?
· Reliability refers to the consistency of a measure and whether the results can be reproduced under the same conditions.
· Validity refers to the accuracy of a measure and whether the results really do represent what they are supposed to measure.
Quality salary survey sources are also based on HR-reported and not employee reported data.
Employers should use two to three salary surveys and not one. The use of two to three helps to minimize the volatility that one salary survey may report year over year.
· Example: Imagine the largest employer that provided pay data each year decided to no longer participate in the salary survey. The single salary survey would have a significant percentage change in the number of incumbents for many jobs and then the compensation data reported by job would be higher/lower than the year before.
Also, salary surveys depend on employers reporting their pay data to publish results. Smaller companies often don’t have an HR/compensation person on staff that has the time to participate in salary surveys each year. So, the salary survey results may be based on primarily mid to larger sized employers because that is who participated.
The imperfections in salary survey data support the use of pay grade structures. The pay grade structures, and the associated base salary ranges and incentive targets, can smooth the volatility that naturally happens in salary survey data each year.
And pay grade structures can provide employers with a framework to recognize internal equity as well as the external market.
You will be better able to meet your pay transparency and pay equity goals if you implement and maintain pay grades instead of job-based market ranges.
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Source: scribbr dot com