Skip to Content
Resource Articles //

Salary Setting: Tools for Determining a Competitive Salary

After Agreeing to a Compensation Approach and Conducting a Job Analysis, Use These Online Market Research Tools to Study Competitors’ Compensation

Anyone who’s read job listings has probably stumbled upon the phrase “salary commensurate with experience.” But have you ever considered what it’s like to be on the other side, determining salaries? For those in human resource careers, salary discussions might be an everyday occurrence. How do HR professionals determine compensation packages, anyway?

According to the Society for Human Resource Management, SHRM, to create salary ranges and compensation arrangements, HR managers at your organization should:1

Salary Setting: Tools for Determining a Competitive Salary

  • Decide on a compensation philosophy for the organization.
  • Collect and analyze internal information for job analysis.
  • Categorize jobs into family groups.
  • Assign points or rankings to specific jobs within each job family. 
  • Assign points or rankings to specific jobs within each job family.
  • Determine pay grades.
  • Re-evaluate often. 

Before assigning salaries to the roles in your company, your organization needs to determine its compensation philosophy. In particular, your company should decide whether it will lead, lag, or match salaries and benefits packages relative to competitors. Leaders pay handsomely, above market, and may attract talent away from other companies. Many companies choose to match market rates. Others opt to pay lower than market rate, whether consciously or unconsciously, lagging the competition. While not a recommended approach for most organizations, highly prestigious companies can get away with lagging compensation structures.1,2

Once employers determine their compensation approach, what is human resources’ role? From here, HR professionals gather information, conduct internal research within their organization, and examine findings in a process called job analysis. First, human resource personnel study a job to learn about the activities, experience, qualifications, responsibilities, and reporting structure necessary to perform the job’s work. Focusing on knowledge, skills, and abilities (KSAs), HR gathers information by directly observing employees or conducting interviews or surveys.3 This research leads to writing a strong and well-defined job description.1

After job analyses have been completed, human resources classifies jobs into groups called job families. Job families typically cluster jobs in similar fields, like management, administration, technical, legal, or sales.1 Then, HR personnel rank the jobs in each family, either by an ordinal ranking system or a points system that compiles different elements of each job.2

Following this internal analysis, human resources practitioners conduct market research to find salary data for each job, studying the median and range for each position. Some of the most notable tools for salary research include:4

  • Bureau of Labor Statistics
  • Indeed
  • Salary.com 
  • PayScale
  • LinkedIn Salary
  • Glassdoor  

The Bureau of Labor Statistics (BLS) is widely viewed as having the best salary range information tools, as well as information on salary trends and outlooks. BLS maintains national wage data for more than 800 occupations and approximately 400 industries, with further breakdowns by job characteristics and gender. It also lists data by state and almost 400 metropolitan statistical areas.5 The site also gives users the ability to download its information in numerous file formats, and houses some global data, which might be of particular interest to companies hiring international freelancers.4

About other online salary tools:4

  • Indeed aggregates data from job postings and reporting from employees and reporters for its free salary comparisons. Small businesses are especially drawn to its competitor analysis tools.
  • Salary.com offers paid report options using filters to nail down specific salary comparisons, which is especially helpful for finding data from employers. Salary.com’s tool uses unique filters as well, like region, company size, experience, and education level.
  • PayScale generates reports summarizing staff costs and needs, allowing a complimentary first report. Data recalculates in real time based on employee submissions. PayScale can also deliver rare insights through scenario-building and benchmarks.
  • LinkedIn Salary shows salary insights, classifying salaries by geographic location and job title. Its most powerful tools can be accessed with a LinkedIn Premium subscriber account, which costs $59.99 per month. But there is also a free option if you provide your personal employee salary data. Built on employee-provided data, LinkedIn Salary’s tools also give bonus, stock option, and signing bonus information.
  • Glassdoor uses data from millions of employees to generate salary insights for its free Know Your Worth calculator tool.6 While it is geared more for the job-seeker, it also provides valuable information for human resource professionals.

Results from HR’s market research will directly inform the salary range for jobs within an organization. Market leaders will pay toward the high end of the range, companies that match will follow the range, and those that lag will compensate near the low end. Based on its compensation philosophy, your company will choose a midpoint for its salary range. Traditionally, ranges vary around 30%. If you choose this calculation, the high end of the job’s salary range will be midpoint salary multiplied by 1.15. The low end will be midpoint times 0.85.7

Salary ranges will fluctuate over time based on economic factors like geography and inflation. To pay employees as fairly as possible, HR professionals should re-evaluate their organization’s job salaries every few years, commensurate with current market conditions.

If you’re interested in accelerating your HR career, Walden University, an accredited university with flexible online education options, offers graduate human resource degree programs, including an online master’s in human resource management and a master’s in business administration with a specialization in human resource management. In Walden’s online MS in Human Resource Management and MBA programs, students can complete HR degree coursework in compensation, benefits, human resource analytics, and organizational leadership en route to rewarding human resource careers.

Walden University is an accredited institution offering MS in Human Resource Management and Master of Business Administration (MBA) with a specialization in Human Resource Management programs online. Expand your career options and earn your degree using a convenient, flexible learning platform that fits your busy life.

1Source: www.shrm.org/resourcesandtools/tools-and-samples/how-to-guides/pages/howtoestablishsalaryranges.aspx
2Source: www.paycor.com/resource-center/how-to-establish-salary-ranges
3Source: www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/performingjobanalysis.aspx
4Source: fitsmallbusiness.com/salary-comparison-tools/
5Source: www.bls.gov/bls/blswage.htm
6Source: www.glassdoor.com/Salaries/know-your-worth.htm
7Source: www.paycor.com/resource-center/how-to-establish-salary-ranges

Walden University is accredited by The Higher Learning Commission, www.hlcommission.org.

Submitting...