How Organizations Can Source Competitive Compensation Data

Wilson Group helps organizations identify, locate and understand what and how the market pays based on a job, location and industry. Organizations need this information to ensure they provide competitive pay opportunity for attracting and retaining employees. Without this data, organizations are solely relying on what (1) recruiters and candidates say they want to be paid to work in a job, (2) current employees requesting more compensation or (3) what other offers current employees are saying they received from other companies. This recruiting information can be quite difficult to organize into a compensation framework and is basically a “sample size of one”.  We know that the differences in how females and males approach negotiating their compensation with employers has also caused gender pay inequities. Wilson Group recommends that both types of data sources are important, especially with a fast-moving labor market.

This blog describes the types of compensation data sources available and what type of compensation information is captured.

Data Sources

Public Data

• Executive compensation data is available by job title, with additional online research conducted at the company website or on LinkedIn to determine the job scope.
• Public companies report executive compensation for their named executive officers (usually five).
• Nonprofits report highly compensated employees via form 990.
• States may require certain regulated businesses to submit data on their organizations, whether public or private. For example, we know that in the past, insurance companies in CT had to submit executive compensation data. At the time this data was only available by physically going to an office and making copies of documents.
• Government employee data is available by federal, state and municipality, though not always online. This data is usually by employee name and not job title with no aggregation available.

Company Submitted Data

• Organizations participate in regular ongoing or special ad hoc surveys run by survey companies/consulting firms. Some surveys can be purchased without participating at a premium price and many others require participation to purchase the data.
• The US government provides free survey data on a limited number of positions at BLS.gov. Many consulting firms offer free surveys for participating, one example is Pave.
• Surveys are purchased by data providers which consolidate and report the data to employers for an annual subscription fee.
• Wilson Group and other compensation firms have provided clients with specialized survey information by conducting ad hoc surveys targeting certain employers, positions and data. This option is most viable when the client has connections and contacts at the desired employers.

Job Posting Data

• With the advent of state pay transparency laws, employers are posting hiring ranges in online recruiting platforms, such as LinkedIn. Some offer consolidated data by title and location, such as Indeed.
• There are new products offered to organizations by data providers that extract the posting data into easily accessible data (example Squirrel and Wagewatch). The most accurate job posting data are jobs advertised often, and at job levels below senior management.

Crowd Sourced Data

• Employees can log in and provide their data to a variety of online platforms, such as Glassdoor and receive their job’s data in return.
• Some providers require employees to answer specific questions in the desire to provide usable and reliable data and then sell it back to companies, like the job posting data.

Recruiter Surveys

• Using the information on offers accepted, large recruiting firms create their own surveys, for example, Robert Half – Salary Guide

Compensation Data Reported

 The most common data reported is listed in order in the list below, salary, bonus and total cash compensation. The data is presented in aggregate based on a data cut. In other words, typically salary surveys and databases do not provide the data by organization name but may offer an opportunity by job to select location and industry and indicates which firms are included in the data, example, Peer Data by Payscale.  Equity, long-term incentive and total direct compensation are available in only select data sources.

1. Base Salary – annual salary and/or hourly wage rate
2. Bonus/Short-term Incentive – the amount paid, and target percent of base salary reported; could include sales incentives separated from non-sales incentives, depending on the survey
3. Total Cash Compensation – annual salary and those receiving an incentive payment that year
4. Annual value of equity awards or long-term incentive annual award value – equivalent to stock price times number of shares or Black Scholes value times number of shares, either broken out by type of equity vehicle or combined
5. New hire and ongoing equity awards as percent of ownership for pre-IPO companies – percent of ownership of total outstanding awards
6. Total Direct Compensation – the sum of total cash compensation plus the annual value of equity awards, both those receiving and not receiving

The prior survey descriptions report how much employees are paid by compensation component. There is another type of compensation survey that describes how compensation programs are designed. They are either general industry, or specific to an industry which are extremely limited. These surveys focus on incentive plan design for either sales, executives or non-sales employees and could include annual and long-term incentives. They typically report:

1. The types of measures, such as revenue, profit, etc.
2. Target percent of total cash compensation or base salary by type of job or salary level
3. Minimum and maximum payout opportunity as a percent of the target (100%), for example 50% to 200% of target
4. Frequency of payout – monthly, quarterly, annually
5. Mechanisms – how are payouts calculated, from discretionary payouts to formulas
6. The performance associated with the payout levels, for example, percent of sales quota

In addition to surveys, some of the information described below is reported for executives in the Compensation Discussion and Analysis section of form Definitive 14a or facsimile public record. These descriptions are in their own words, whereas a survey report brings together information in a consistent format with a much larger sample size. 

Disclosure of Non-public Compensation Data 

1. The Sherman Antitrust Act of 1890 was established to ensure competition and eliminate monopolies. It has been determined through the courts, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) that conducting your own surveys could be deemed anti-competitive price fixing when the element of collusion to “fix the cost of labor” is present. Included in the elements of collusion are the current average pay rates deemed to be historical data combined with merit budget estimates.
2. Exxon, nursing groups in Utah and Connecticut, and the Federal Reserve Bank of Boston have been accused of price fixing salaries based upon surveys they have devised.
3. The following anti-trust safety zone steps established by DOJ and FTC is what Wilson Group and other consulting firms follow in conducting compensation surveys:

• An independent third party (consultant, academic institution, government agency or trade association) should manage the survey.
• Data provided by survey participants must be more than three months old.
• Use at least five survey participants, with no individual participant’s data representing more than 25 percent weighted basis of a given statistic.
• The results must be reported so recipients cannot determine specific participant data. 

As you can see, there is a vast array of approaches to obtain the information organizations want, but there are limitations in obtaining specific data from specific organizations. To ensure credible data is available to share in aggregate, it is so important that organizations regularly participate in third party surveys.

Remember, compensation data is just one piece of the puzzle. It is essential to consider your company culture, career development opportunities, and employee well-being initiatives to create a truly competitive and engaging work environment.

For assistance with navigating the complexities of compensation data and building a comprehensive total rewards strategy, contact Wilson Group today. We offer a range of services tailored to your unique needs, helping you gain a competitive edge in the war for talent.

Susan brings over 25 years in consulting and leadership positions in compensation and human resources to her clients. Susan advises boards of directors, executives and leaders in sales, human resources and compensation functions on the strategic application of total reward programs. She works with a broad range of public, private and non-profit clients in technology, industrial, and service sectors throughout the country in the assessment, design and implementation of sales, executive and employee compensation programs.