The ongoing importance of using accurate pay data
Accurate and timely compensation data in the form of salary surveys continues to be one of the most important tools that your Human Resources team can use to attract, retain, and motivate employees. No matter what else is in the spotlight, a strong foundation of competitive pay will never lose its importance. Of course, as pay transparency becomes the norm and employees are able to access more and more publicly available pay data, they are scrutinizing and comparing what you offer them in starting pay and even talking about pay with their colleagues.
With today’s labor market and workforce challenges, using aged data rather than participating in and purchasing new salary surveys annually would be a mistake.
1. Masking true increases in pay
Outdated salary data used to right-size pay may not reflect the current market conditions or changes in job responsibilities. In the not-too-distant past, many employers were operating outside of their compensation strategy, offering premium pay to new hires and out-of-cycle retention increases to employees. Now that the labor market has stabilized, organizations are shifting back to a proactive rather than reactive approach. Salary data that has been aged may not reflect important factors like the demand for certain skills or the impact of inflation, giving a misleading idea of current salary trends.
Also worth noting is that over the past couple of years, we have seen annual increase budgets contract, returning to pre-pandemic levels that had already persisted for years.
We expect that trend to continue and for the increase budget to be spent even more strategically in order to retain key talent.
Only by purchasing salary surveys annually will you be able to understand which jobs are receiving increases above or below the national average. You need this information to make accurate and informed decisions about how to distribute a relatively small increase budget. Don’t age last year’s survey data. Budget for and plan to purchase fresh salary surveys as you head into this compensation planning season.
What does it mean to “age salary survey data”
“Pay doesn’t change that much from year to year, right?” This thinking leads employers, in an effort to save money, to age salary survey data rather than purchase new data annually.
Aging salary data is the practice of adjusting pay data from previous years' salary surveys and using it to reflect the current market conditions. Employers using this approach would take the annual salary increase projections found in reports such as Mercer’s Compensation Planning Survey and increase salary survey data from the prior year.
So, what’s the issue? Typically, only one number is applied across all job families, leaving a lot of room for inaccurate adjustments. Even in a more stable labor market there are jobs and skills in higher demand than others. When that happens, those jobs tend to command a higher pay increase year over year than others. By applying one increase adjustment across your salary data, those differences will not be reflected.
To put it plainly, if you are aging old salary data, you’re not using data that reflects the current market.
2. Missing new emerging “hot” jobs
With the ever-changing way that businesses are shifting — how retailers sell products, how doctors see patients, how services are offered to customers — jobs that we’ve thought of as hot in the past will be replaced with new jobs. The increased importance of digitization and technology, regardless of the industry, will mean that a portion of a company’s salary budget will be allocated for particular IT jobs, but not all IT jobs across the board.
What other jobs will be seen as critical to thriving businesses in 2025 and beyond? How will managers allocate limited budgets? Which jobs will be in high demand?
Up-to-date salary surveys are the key to understanding where you need to focus to both retain existing talent and attract the new talent your organization needs. If your organization is using aged survey data, it's likely to miss out on emerging hot jobs and skills, in turn missing out on top talent.
3. Misaligning short-term incentives with business goals
More and more employers are adjusting their compensation strategy and pay mix, putting more emphasis on short-term incentives to reward performance. Setting incentive targets using aged data runs the risk of setting unrealistic targets that could affect employee performance and morale.
There is also the risk of setting incentive targets that are not aligned with current business goals. Using aged survey data will not capture changes in business priorities, resulting in incentive goals that do not support desired business objectives.
To set target incentive levels appropriately, you’ve got to understand the total cash compensation level (base pay + short-term incentive target) and how that aligns with your compensation strategy. Annually published salary surveys will provide you with the details to modify your company’s strategy and pay mix.
4. Getting the most out of your budget
By participating in and purchasing new salary surveys annually, you’ll not only lock in a reduced rate for the publication, you’ll ensure you’re paying employees appropriately — and not overpaying. It’s important to understand how to use your salary budget and your annual increase budget in the right places.
Beyond that, do you have a limited budget for purchasing salary surveys this year? Most companies do. Make sure you work with the best data and customer service provider. With dependable data covering a wide range of industries and jobs delivered via Mercer WIN®, Mercer’s salary surveys can’t be beat. Further, our customer service is unparalleled. Need help participating in a survey? We’re here for you. Not sure what data to pull to assess your market competitiveness? Our team is happy to provide you with guidance.
Hopefully, you’re convinced — the labor market is just too complex to skip purchasing salary surveys annually. In order to understand the nuances of this labor market, and get the best value for your survey budget, participating in and purchasing surveys every year is a must.
Wondering which surveys will be best for you? Give us a call 855-286-5302 or email surveys@mercer.com.