Question

List and explain why a company would choose to use a published

compensation survey vs. creating their own survey.

Answer 1

Compensation professionals create market competitive pay systems based on four activities: 1. Conducting strategic analyses 2. Assessing competitors’ pay practices with compensation surveys 3. Integrating the internal job structure with external market pay rates and 4. Determining compensation policies

Let’s say you pay an employee way too much for a job.Excessive pay restricts a company’s ability to use that money to invest in other important strategic activities such as research and development or training because money is going to a limited resource. Compensation surveys contain data about competing companies’ compensation practices.

There are two important considerations before undertaking compensation surveys:

1. What do you want to get from the survey and

2. Should you develop it yourself or buy it (existing survey)

If a company develops its own survey, there are some drawbacks. First, people may not be qualified to do it. Second, companies are usually very reluctant to give that information directly to companies. Third, custom survey development can be very costly.

Most companies end up using published compensation data. There are two important considerations: One, should the data be core base pay, employee benefits, or both? Benefits are a critical area due to rising costs and upcoming health legislation, and it accounts for over 25 % of payroll costs. Second, what are the sources they want to use? Trade unions, compensation professional associations, etc