As promised, we'll now turn our attention to how we calculate the fair market value of a position's base pay. To revisit our earlier post on terminology, base pay is the wage you receive every two weeks and does not include commissions, spiffs, or bonus. These are variable compensation pieces, and the value at targeted performance is usually calculated or expressed as some percentage of base pay. The base pay calculation, therefore, is very important in accurate and fair compensation as it impacts variable pay calculations.
The first important consideration in knowing how job prices are calculated is to know what we use to calculate them. This is the subject of today's post.
Job Descriptions - Specifically, we focus on the section in the JD template that addresses skills, duties and resopnsibilities, and specifically not the sections on education, reports to, or title. Job value is all about the duties of the position and the scope of responsibility (people supervised, level of direct customer or author contact, cost of mistakes, etc...). It is not about the qualifications of the individual who holds the job past consideration of the minimum qualifications to hold the job. In other words, you must meet the minimum standards to hold the job; past that what those qualifications happen to be do not directly influence pay. For instance, some jobs may not be available to high school graduates (such as the job of Accountant), but in jobs where there are no special education requirements high school graduates and MBAs doing the same exact job have the same pay range.
Salary Surveys - You may or may not know that there's an entire industry out there built around providing market information for various jobs. While the government tries to provide this information free for anyone who wants it through the Department of Labor, their surveys are done about every three years and take about a year to calculate and publish. As such, its out of date before it hits the public's eye. The most reliable and current data therefore comes from salary surveys published through for-profit compensation consultants, industry associations, chambers of commerce, etc... For Nashville operations we use the following outside resources:
Nashville Area Compensation Survey
Evangelical Christian Publishers Association Salary Survey
Comp Data Tennessee/Kentucky
Robert Half Accounting and Finance Survey
State of Tennessee Survey
Watson Wyatt Survey of Middle Management Compensation
Business and Legal Reports Survey of Exempt and Non-Exempt Compensation
Salary.com (we have a subscription to their data for employers that the public can't access)
That's all for now; next time we'll look at the calculation process of how we turn salary survey data into a job price. Until then your comments, as always, are welcome.