Salary surveys: a user's guide

A wide range of salary surveys is available to help employers benchmark their internal pay levels and reward packages against trends in the wider labour market. We set out some practical guidelines to help practitioners draw out the information they need from such surveys.

On this page:
Why use salary surveys?
Salary survey data in context
Strategic and operational pay policy
Which elements of reward are covered?
      Basic pay and total remuneration
      The wider reward package
Which labour market is relevant?
      Occupational data
      Sector-specific information
      Location
      Employer size and characteristics
Factors to consider when using salary surveys
      Type of publisher
      Participating in surveys
      Job matching
      Coverage and sampling
      Quality of analysis
      Timing
      Choosing the media
Job evaluation and market premia
Alternatives and supplementary sources to salary surveys
Additional resources on XpertHR.

Employers seeking to determine pay rates and to design broader reward packages for their own workforces often take a keen interest in how other organisations are rewarding comparable individuals. While external market rates are rarely the only influence on internal pay practices, many employers consider it essential to take market rates into account if they are to recruit, retain and motivate employees in their own organisations.

When seeking to assess external pay levels, the first port of call is often recourse to salary surveys - publications that set out information on pay, and sometimes wider benefits provision, for employees in varying occupations and across differing levels of responsibility. Within such a broad definition of salary surveys, however, lies a hugely diverse range of practice in survey provision and content.

Why use salary surveys?

Salary surveys are primarily used to assist the process of market pricing, defined by the CIPD (external website) as "a system of collecting data on the pay rates for similar jobs in other organisations to establish their market rate or 'price' and track movements in those rates".

Examples of the purposes for which reward practitioners may utilise salary survey data include:

• benchmarking pay levels against other organisations, particularly those that compete in the same labour market;
• influencing the determination of pay rises or bonus payouts;
• comparing and assessing the wider benefits package, such as healthcare, and sometimes broader "total reward" approaches (encompassing non-financial aspects of work such as flexible working opportunities);
• helping to design new pay and grading structures and progression arrangements when a pre-existing pay structure is replaced or overhauled; and
• when a company is recruiting to new types of role or involved in a merger/acquisition.

Salary survey data in context

How survey data is put to use will depend largely on the type of grading structures and pay progression arrangements that are in place, or are planned, in each individual organisation. Some employers operate fairly simple "spot rate" systems for at least some employee groups (with a single pay rate allocated to each job in the structure) - where all that may be required is to keep an eye on the up-to-date "going rate" for certain jobs (for example, database administrator or healthcare assistant).

Elsewhere, more complex grading systems are in place using broadbanded pay structures (where jobs may be "slotted in" at any pay level within each band) and/or based on pay progression determined by individual performance. In such cases, more elaborate manipulation of data may be required to determine minimum and maximum salaries associated with individual merit rises and/or broadbanded grades.

Strategic and operational pay policy

At a strategic level, an organisation will need initially to determine a pay policy in respect of the level it wishes to pitch itself against its labour market competitors. A common theme is organisations pitching rates at the median - the point at which half the salaries are at the same or a higher value and half are at the same or a lower value - of external market rates. Rates for key personnel may be set closer to the upper quartile (the point above which just 25% of salaries stand) - the idea being that this will attract staff who are of the highest quality affordable. Indeed, some surveys include data on labour turnover levels, which may be useful in initially determining where rates need to be pitched to minimise attrition levels for key staff groups.

That strategic pay policy then needs to be translated into action at the operational level by drilling down into the detail of salary survey data when determining, say, lower and upper salary brackets for varying employee groups.

Which elements of reward are covered?

Basic pay and total remuneration

Salary surveys may cover a range of aspects of monetary reward encompassing basic salary (the guaranteed element of pay) and wider or variable earnings. They usually present findings by means of basic statistics such as medians, quartiles and average figures for a range of employee groupings.

It is essential that any survey clearly defines what is actually meant by such phrases as "basic pay" and "total earnings", otherwise practitioners cannot be sure that they are comparing like with like. For example, while bonuses would obviously be regarded as part of total earnings (rather than basic pay), regional allowances (such as London weighting) might be regarded by some as part of base pay yet excluded by others from such a definition. It is also helpful for publications to set out brief guidance on the statistical analysis and definitions used.

The wider reward package

Beyond the "cash" elements of an employer's offering - basic salary, bonuses, regional allowance and any other monetary payment - surveys may look at the wider package of pay and benefits (such as company cars) and sometimes even more imaginatively at the concept of "total reward" (which also includes elements such as training opportunities). In lower-level jobs the benefits package may be low-key or virtually non-existent and the focus may be more on basic salary or hourly pay rates.

A wide range of information in respect of non-basic-pay areas is often included in salary surveys, while some specialist surveys focus exclusively on pensions or other aspects of the benefits package (rather than on pay data).

Which labour market is relevant?

Prior to drawing on survey data, employers need to consider the labour market or markets relevant to their labour needs. Hence, for senior or specialist positions - for example, marketing managers, lawyers or actuaries - the national (or even international) labour market is often relevant. By contrast, for lower-ranking jobs, a local labour market comparison is often more appropriate (for example when recruiting cleaners or receptionists).

Many employers are particularly interested in salary data presented or broken down by one or more of four key groupings:

• occupation;
• sector;
• location; and
• company size, usually as measured by employee numbers or revenue.

In practice, many organisations use more than one survey - for example larger organisations with large numbers of staff in specialist or support functions such as IT or HR would often turn to surveys covering each of these occupational groups separately. Similarly, it is possible to select a survey covering an entire sector (for example, distribution) or locality (East Anglia, for instance). Certain surveys might also, in practice, specialise in large or small firms in particular industries or regions.

Occupational data

A data breakdown by occupation is an obvious requirement from salary surveys, and many surveys present an extremely detailed occupational breakdown by such factors as levels of seniority and responsibilities for staff management. Such data may in turn be further broken down by the other key factors of industry, location and size - and potentially by a wide range of other factors (such as the qualification levels of postholders).

Sector-specific information

Certain sectors tend to be pay higher than others, particularly for highly sought-after employee groups - for example finance sector employers might need information on pay levels for specialist IT professionals in their own sector to retain the key employees they need.

Conversely, a sector focus may be used to moderate paybill costs in highly competitive business sectors such as charities or in other sectors less able to afford to keep pace with the highest-paying sectors. Pay information specifically tailored to the not-for-profit sector, for instance, can be particularly important for charities and housing associations as they may be unable or unwilling to compete with certain areas of private sector employment - at the same time as wishing to provide a robust reward offering appropriate to the sector.

Location

Users may wish to have data broken down by location. As would be expected, salary levels in London and the South-East generally command a significant premium over the rest of the UK to take account of the higher living costs in that area.

Employer size and characteristics

Employers often need information broken down by company size, especially as larger firms tend to have more generous packages than small companies.

As well as size, the culture or characteristics of organisations are often relevant factors. Practitioners might consider whether or not the survey organisations reflect the user's own company - for example "legacy" pay practice in a utilities company that was formerly in public ownership may not accurately reflect wider practice in that industry.

Although the data set out within the body of survey reports is generally anonymised, many include a list of survey participants as an annex.

Factors to consider when using salary surveys

Once reward specialists have determined a pay policy - underpinned by a consideration of the blend of reward that needs to be included in the offer - and resolved the appropriate labour market(s) to take into account, a range of additional factors need to be considered. These will help practitioners when choosing and using the surveys from which they hope to obtain suitable data to put the policy into practice.

Type of publisher

Employers need to look carefully at the rationale and likely standards of data they will receive from different providers. A wide range of publishers operates, including XpertHR: more details of our own surveys are available on our website. Some survey publishers are commercial organisations for which the publication of surveys and related information is their raison d'être and which would therefore be expected to adhere to rigorous standards. Such publishers sometimes produce surveys in conjunction with professional bodies representing the occupation that is the focus of the survey - which can add credibility and increase the willingness of practitioners to participate.

Other survey producers, by contrast, publish surveys primarily as a marketing ploy (for example recruitment agencies). Such information is likely to be less reliable, albeit at a much lower cost.

Participating in surveys

Practitioners need to decide whether they are willing to participate in salary surveys or wish simply to purchase an off-the-shelf survey. In addition to ensuring greater accuracy, comprehensive participation makes it easier to draw on information as jobs are clearly matched between the survey criteria and the organisation's own roles. Many of the more valuable data tools produced by survey providers can only operate if the organisation has participated. Indeed, many surveys are only available to participants (or, sometimes, are available to participants at a discounted rate). However, practitioners need to be prepared to allocate the resources associated with this exercise, which can be time-consuming especially on initial participation - although the degree of labour intensity tends to decrease over time.

Job matching

Any salary survey needs to be underpinned by an effective process of job matching. Clarity of job matching is critical as job titles are sometimes so broad as to be almost meaningless. For example the term "customer services manager" could cover an extremely wide range of responsibility and salary levels. The criteria should include aspects such as seniority, responsibility levels, existence/numbers of direct reports and so on.

Ideally, survey data should be based on job matching that is not undertaken in isolation by the HR function - it is preferable for line managers, who have a robust understanding of the nature of each job in question, to be involved in this process.

Coverage and sampling

One approach for gathering data for surveys is to collect data on all employees in an organisation: while this approach should ensure the highest possible standards of accuracy, it is likely to involve a heavier workload for survey participants when compared with an alternative approach. XpertHR adopts this approach and offers participants help and guidance with the process.

Alternatively, survey data may be based on a sample of certain job posts, from which wider findings are extrapolated. In this case, sample size is important as if the size is too small data will be unreliable. Many providers prefer not to publish data for certain sub-sample groups deemed too small, both to avoid unacceptable deterioration in accuracy and to protect the privacy of individual organisations or employees where identification might otherwise be possible.

A larger sample size is also useful as it enables the provision of greater depth of information and detail on particular issues or sub-topics. For example, if only 20% of employers in a survey provide company cars to any employee groups, richer and more detailed information on this sub-topic can be gleaned if this is 20% of a reasonably large overall participation group.

The use of matched samples is the only reliable way of allowing a comparison of year-on-year trends. This can be difficult to achieve where suppliers rely on sample jobs rather than individual data.

Quality of analysis

The quality of the analysis supporting the statistical data is an important consideration - some surveys are little more than a collection of numerical tables whereas others guide users through the figures with well-informed commentary, picking out key findings and explaining the driving forces and likely future trends.

Timing

The date for which the information is valid is important to take into account - particularly during times of rapidly changing inflationary pressures - as it often takes some time between the collection of data and the publication date of each survey.

Choosing the media

Survey data may be presented in either hard-copy or online format (or both). Some users may find that an online system works efficiently by linking into their own HR systems and can help to draw out the specific data required and present sometimes sophisticated analyses using the technology relevant in individual organisations.

Regardless of the nature of the media used, the accuracy of the data is paramount - there is little point in being able to pull out and present a raft of detailed figures using sophisticated technological platforms if, say, the basic job matching underpinning the findings has not been undertaken correctly in the first place.

Job evaluation and market premia

Often, pay levels will be determined by a combination of an internal job evaluation exercise that examines pay relativities and differentials within an organisation (or some other process of deciding internal relativities, such as management judgment) together with input from data on external pay rates. This can lead to tensions if the results of an internal job evaluation exercise suggest differing values and pay relativities between jobs compared with those seemingly dictated by market forces. Employers also need to take account of gender or other equality considerations in such circumstances.

One possible alternative approach to full "market pricing" is to use internal relativities as determined by such an exercise but to pay one-off or ad hoc market supplements or market premia that temporarily bring pay levels up to those reflecting current rates in the external labour market. These premia may then be removed if pay pressures subside for any occupational group. Salary survey data may also be drawn upon to help set appropriate levels for any such premia.

Alternatives and supplementary sources to salary surveys

Some employers choose to conduct their own bespoke research into external pay levels. This may be useful for highly specific or fairly unique roles - for instance in the case of an oil company researching rates for deep-sea divers in the North Sea - but can be very time-consuming. Others join private pay clubs (for example covering major hoteliers), which can again provide highly specialised and focused information - although only a limited range of such clubs are available and access may be restricted.

Publicly available information includes the Annual Survey of Hours and Earnings. While boasting the advantage of highly comprehensive coverage, this approach has its limitations for the purposes of many pay-setters (for example, only fairly overarching data on pay and other earnings is available rather than a detailed occupational breakdown by such factors as seniority).

One approach is to use a selection of salary surveys supplemented by a variety of other alternative publications to help determine pay levels and pay rises within an organisation. Indeed, a wide range of sources and information are often taken into account in informing pay decision-making - backed up, most importantly, with the use of pay practitioners' own judgement - in determining how to interpret salary survey data effectively for use in their own organisations.

This article was written by Janet Egan, a freelance researcher and writer.

Additional resources on XpertHR

• XpertHR's Job Pricing service This service provides access to top-quality market pay data for those customers who participate in and subscribe to XpertHR salary surveys.
• Market-related pay Run this saved search to access other XpertHR articles on market-related pay.