How to Conduct a Salary & Compensation Study

Conducting a salary and compensation study can serve the organization in many ways. Compensation studies analyze if your wage rates and salaries are competitive for your industry or your geographic locale. An analysis of your pay practices can also help you determine if your pay practices comply with employment laws, such as the Fair Pay Act of 2009 or the Equal Pay Act of 1963. Some organizations outsource their compensation studies, while others use in-house resources to evaluate company salary and compensation structure. The benefit of outsourcing includes engaging an objective viewpoint; however, a limited budget may be the deciding factor for using in-house expertise to analyze compensation.

Obtain an IT-generated employee census report which will be sorted into occupational groups and further sorted by race, sex, age and tenure. This will likely require four separate reports to facilitate the least complex analysis possible for each set of variables. Once you have the reports, determine the primary reason for conducting this compensation study. You can conduct a study that determines your industry standing or a study that answers a specific question about pay practices, such as disparities between pay for female workers versus male workers.

Conduct research on companies in direct competition with you, as well as research concerning mean wages and salaries for occupational groups and specific occupations. The U.S. Bureau of Labor Statistics has extensive material to help you construct queries based on numerous variables, including geographic locale. Find additional data concerning how salaries in your area compare to the Consumer Price Index and cost of living statistics. Your professional network and even colleagues who work for competitors can be especially helpful in your search for information on comparable salaries.

Draft a list of occupational groups--administrative, manager and professionals, sales, skilled and unskilled occupation. The U.S. Equal Employment Opportunity Commission provides a standardized definition of occupational groups. If your organization submits an annual EEO-1 report, you will complete this task in very little time.

Examine each occupational group separately. Determine if there are any glaring disparities in wages or salaries among workers across different ages, races, sex or tenure. Companies can adjust their salary structures incrementally usually through performance evaluations or cost of living salary adjustments. Be sure to look at total compensation, which includes financial incentives, commission and bonuses.

Calculate your organization's pay structure based on industry pay, geographic locale and pay for specific occupations based on previous research steps. Your goal in this part of the compensation study is to determine where your salaries fall in comparison to similar size companies in the the same industry. Depending on your budget, an impressive compensation structure may fall somewhere in the 75th to 85th percentile, meaning your company pays more than at least 75 percent of all companies.

Compile your calculations, research and recommendations into a written presentation for the human resources department. Explain your research methodology, as well as the results of your analyses and comparisons. Be prepared to present your findings to upper management and retain a copy in the human resources department for comparison to next year's compensation study.

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About the Author

Ruth Mayhew has been writing since the mid-1980s, and she has been an HR subject matter expert since 1995. Her work appears in "The Multi-Generational Workforce in the Health Care Industry," and she has been cited in numerous publications, including journals and textbooks that focus on human resources management practices. She holds a Master of Arts in sociology from the University of Missouri-Kansas City. Ruth resides in North Carolina and works from her office in the nation's capital, Washington, D.C.