Are your employees underpaid?
With inflation and costs of living continuing to rise around the country, salary has become a hot topic. Jobseekers are increasingly becoming more and more hesitant to accept new roles when the salary will barely pay their bills. This has led employers who are struggling to fill positions and retain talent to ask: Are my employees underpaid?
This question can be answered via two different tactics: determining up-to-date salary ranges and conducting a compensation analysis.
Determining salary ranges requires research and a thorough knowledge of the job’s industry, responsibilities, and location. The company budget and values are important factors as well. Having established salary ranges can be a valuable asset for companies: salary ranges can help manage salary expenses in organizational budgets, ensure equity among employees, and guarantee that employee salaries are at market rate.
Specific steps to determine a salary range include:
Researching industry benchmarks: To obtain an understanding of the range of salaries that are typically offered for each role in the job’s industry, research salary data for similar roles. Sources for this information include salary surveys, industry trade groups, and online resources such as salary databases.
Considering the company's budget: Determine how much the company can afford to pay for the role based on its overall budget and financial resources.
Analyzing the specific responsibilities of the role: Take some time to think about the level of experience and skills required for the job, as well as the complexity and scope of the job responsibilities.
Taking the location of the role into account: Salaries can vary based on the location of the role. For example, roles in large cities often command greater salaries due to a higher cost of living.
Contemplating the company's culture and values: Some companies may place a greater emphasis on paying competitive salaries as a way to attract and retain top talent. Others opt to simply match the market rate and pay in the same range as their competitors.
Conducting a compensation analysis can also help employers determine if their employees are being fairly compensated. Compensation analyses are reviews of a company’s pay practices and policies, with a focus on the salaries and benefits provided to employees. In addition to being used to determine if a company is paying a fair salary, compensation analyses can also be used to make decisions about pay adjustments and identify any salary inequities.
Here are the steps typically involved with conducting a compensation analysis:
Defining the scope of the analysis: The purpose of this step is to clearly define the reason behind this analysis and determine any specific goals to be achieved. Employers should ask themselves the following questions: Are you looking to determine whether the organization is paying competitive salaries? Are you looking to determine any pay discrepancies or inequities? Are you looking to make decisions about pay adjustments or raises?
Gathering relevant data: This step involves collecting data on the salaries and benefits provided to employees, as well as any relevant policies and practices. This may include salary surveys, industry benchmarks, internal payroll records, and any other relevant information.
Analyzing the data: Following step #2, companies can use the data they have gathered to identify patterns and trends. Companies can also use this information to determine whether the organization's pay practices are in line with industry standards and the organization's goals.
Identifying any pay discrepancies or inequities: Employers should look for pay discrepancies or inequities based on factors such as job level, tenure, gender, race, or other characteristics.
Making recommendations: Once a company has the results of the compensation analysis, they can make recommendations for any changes to the organization's pay practices. They can also advise on any pay discrepancies or inequities that have been identified.
It’s worth noting that conducting a compensation analysis can be a complex and time-consuming process. It may be helpful to work with a human resources professional or a consultant with expertise in this area.
In this day and age, offering a salary that is market-rate or above is critical to consistently attract and retain top talent. Whether employers establish salary ranges or work with a professional to conduct a compensation analysis, it is clear that determining whether or not they are offering fair compensation should be a priority for companies to ensure future success.
