Learn the best strategy to address recent changes to salary market data for key roles. Discover tips to maintain accurate and current compensation data.
Table of Contents
Question
Which is the best strategy to address recent changes to the salary market data for key positions?
Answer
Identifying the age of the salary data. Aging data addresses movement in market rates by adjusting obsolete or outdated data. Changing positions to higher compensation grade levels may result in inaccurate internal data. Factoring cost of living adjustments into the data is assumed and may not provide accurate level of equity.
Explanation
The best strategy to address recent changes to the salary market data for key positions is identifying the age of the salary data.
Salary market data can quickly become outdated, especially in dynamic job markets or rapidly evolving industries. As time passes, the compensation data collected previously may no longer accurately reflect the current market rates for those positions.
By determining the age of the salary data, HR professionals can assess whether adjustments are needed to bring the figures in line with the latest market realities. A common approach is to age the data by applying a factor that accounts for typical market rate changes over the time period since the data was collected.
For example, if the salary data is two years old and the market has experienced an average 3% annual increase, aging the data would involve multiplying the original figures by 1.03^2 (approximately 1.0609) to estimate the current market rates.
The other options mentioned are less effective:
- Changing positions to higher compensation grade levels based on outdated data risks introducing inaccuracies to the internal salary structure. The changes may not align with the true market value of those roles.
- Factoring cost of living adjustments (COLA) into the salary data is often already assumed when compiling market data. Applying additional COLA may double-count this effect and inflate salaries beyond the actual market rates.
In summary, identifying the age of salary market data and aging it appropriately is the best way to address recent market changes and maintain accurate, current compensation figures for key positions. This allows HR to make informed pay decisions and keep salaries competitive.
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