Establishing Pay Rates

It is difficult to set pay rates if you don’t know what others are paying, so salary surveys lay a big role in pricing jobs. Virtually every employer conducts at least an informal telephone, newspaper, or Internet salary survey.

Employers use these surveys in three ways. First, they use survey data to price benchmark jobs. They then use these as the anchors around which they slot their other jobs, based on each job’s relative worth to the firm. Job evaluation helps determine the relative worth of each job. Second, employers typically price 20% or more of their positions directly in the marketplace rather than relative to the firm’s benchmark jobs, based on a formal or informal survey of what comparable firms are paying for comparable jobs. A dot-com firm might do this for jobs like Web programmer, whose salaries fluctuate widely and often. Third surveys also collect data on benefits like insurance, sick leave, and vacations to provide a basis for decisions regarding employee benefits.

Salary surveys can be formal or informal. Informal telephone or Internet surveys are good for checking on a relatively small number of easily identified and quickly recognized jobs, such as when a bank’s HR director wants to confirm the salary at which to advertise a newly open cashier’s job. Such informal techniques are also good for checking discrepancies, such as when the HR director wants to find out if some area banks are really paying tellers in some sort of incentive plan. Perhaps 20% of large employers use their own formal questionnaires surveys to collect compensation information from other employers. Most of these ask about things like number of employees, overtime policies, starting salaries, and paid vacations.

Commercial, Professional, and Government Salary Surveys:

Many employers use surveys published by consulting firms, professional associations, or government agencies. For example, the US Department Labor’s Bureau of Labor Statistics (BLS) conducts three annual surveys: (1) area wage surveys; (2) industry wage surveys; and (3) professional, administrative, technical and clerical (PATC) surveys.

About 200 annual area wage surveys provide data for a variety of clerical and manual occupations ranging from secretary to messenger to office clerk. Area wage surveys also provide data on weekly work schedules, paid holidays and vacation practices, health insurance and pension plans, as well as on shift operation and differentials. Industry wage surveys provide similar data, but by industry. They provide national pay data for workers in selected jobs for industries like building, trucking and printing. PATC surveys collect pay data on 80 occupations, including accounting, legal services, personnel management, engineering, chemistry, buying, clerical supervisory, drafting. They provide information about earnings as well as production bonuses, commission, and cost of living increases. The BLS recently organized its various pay surveys into a new national compensation survey and began publishing this information on the Web. The Internet site is

Private consulting and/or executive recruiting companies like Hay Associates, Heidrick and Struggles, and Hewitt Associates publish data covering compensation for top and middle management and members of boards of directors. Professional organizations like the Society for Human Resources Management and the Financial Executives Institute publish surveys of compensation practice among members of their associations.

Watson Wyatt Data Services of Rochelle Park, New Jersey, publishes several compensation surveys. Its top management compensation surveys cover dozens of top positions including chief executive officer, top real estate executive, top financial executive, top sales executive, and top claims executive, all categorized by function and industry. Watson Wyatt also offers middle management compensation surveys, supervisory management compensation surveys, sales and marketing personnel surveys, professional and scientific personnel surveys, and surveys of technician trades, skilled trades, and office personnel, among others. The surveys generally cost about $500 to $700 each, but can be worth the expenses if they help avoid the dual hazards of (1) paying too much or (2) suffering turnover because of uncompetitive pay.