Comparators are organizations chosen for comparison in a salary survey. The comparators are chosen because they possess certain characteristics, such as being in the same sector, having similar headcount sizes, and many other characteristics.
Salary surveys are an important tool used by organizations to benchmark the competitiveness of their compensation structure. Salary surveys help organizations set appropriate remuneration structures that ensure internal and external equity. However, for these surveys to be effective, selecting the most suitable comparators is essential. Selecting the right comparators can help organizations to ensure that the data collected is accurate, relevant and useful.
Comparators: Factors to consider when selecting salary survey comparators
Industry
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When conducting a salary survey, companies must select comparators from the same sector. This is because the compensation structure and practices vary greatly between industries. For example, the compensation structure in the technology industry may differ significantly from that of the finance industry.
Companies would compare their salaries with same industry companies to fairly price their labor. If an organization overpays its labor compared to its competitors, the staff cost-to-income ratio will be high, leading to increased prices of goods and services. This will lead to the organization's products losing their price competitiveness.
Companies also lose their best talent, usually to organizations in the same industry. For example, roles in mining like mining engineers are likely to go into other mines. Therefore, it is essential to select comparators from the same industry to ensure that the data collected is relevant and useful.
Limitations: A sector-based comparison may fall short since there may be fewer comparators operating in the sector. The comparison may be distorted due to the variation in the scope of operations of companies in that sector. In addition, organizations usually compete with all sectors in the labor market. For that reason, an organization can lose staff to other sectors outside its industry.
The truth is that you don't always lose employees to your direct competition. Many people in many roles can find jobs in any organization. 80% of the functions of an organisation are transferable to any industry of the employee's choice, and these are not likely to be businesses that compete with yours for goods and services.
Geography
Geography is another important factor to consider when selecting comparators. Organizations should select comparators from the same geographical location. The cost of living, tax laws, and other economic factors can vary greatly from one location to another. For example, the cost of living in one city may be higher than in many other locations, affecting the compensation structure of organizations operating in these locations.
Therefore, it is essential to select comparators from the same geographical location to ensure that the data collected is relevant and useful.
Limitation: By only considering organizations from the same geographical area, organizations may have a narrow view of the job market and compensation trends. This can limit the organization's ability to make informed decisions. Some organizations lose their employees to other regions.
Size of the organization
The organization's size is also an important factor to consider when selecting comparators. Organizations should select comparators that are of a similar size to the organization conducting the survey. Organizations choose comparators of the same size in terms of headcount and revenue. Larger organizations typically have more resources and a different compensation structure than smaller ones. For example, a large multinational corporation may have a different compensation structure than a small startup. Therefore, it is essential to select comparators of a similar size to ensure that the data collected is relevant and useful.
Limitations: By limiting the comparators to organizations of the same size, the data collected may be insufficient to make meaningful comparisons and draw accurate conclusions about the compensation trends in the industry or job market.
Employees looking for opportunities do not necessarily move from one big organization to another or from one small organization to another. They join companies that offer competitive salaries and additional advantages like a positive workplace culture and opportunity for professional advancement. Comparing your remuneration to organizations of similar size will not help establish good remuneration practices, especially staff retention.
Job Role
The job function is another important factor to consider when selecting comparators. Organizations should select comparators for the same job function as the organization conducting the survey. For example, when doing salary benchmarking for technical jobs, the organization should consider comparators with employees with the same job functions even though they are not in the same industry. This will help the organization to have a broader picture of how employees with the same job function are being compensated.
Seniority Level
The seniority level is also an important factor to consider when selecting comparators. Organizations should select comparators at the same seniority level as their employees in the survey. Salary structure for different seniority levels can vary greatly, even within the same industry, location, and job function. For example, a senior manager may have a different compensation structure than an entry-level employee. Therefore, selecting comparators at the same seniority level is essential to ensure that the data collected is relevant and useful.
Direct Competitors for talent
Having enough knowledge of where your employees will be going after they quit is critical. Analyze this in relation to level and sector. For instance, are certain job families joining a particular industry? Are some job families joining a specific industry? Are certain levels of your employees joining specific sectors? You might compile a list of the industries that are attracting your talent. You ought to be able to identify a distinct pattern.
Additionally, it is crucial to track and evaluate the sources of your new hires. Which industries are they originating from? This will help the organization structure its remuneration by knowing which sectors you can get new talent from without necessarily paying high salaries for that new talent.
Occasionally, no trend will show up because your former employees will be randomly dispersed across all industries. Benchmarking salaries versus the national market is always a better place to start. The general market survey gives you a broad picture of what's going on in the industry.
Multi-Sector Approach
Organizations do not only lose talent to organizations in the same sector, so choosing comparators only from the same sector may limit the survey's outcomes. The Multi-Sector Approach will benefit the organization by collecting data with a broader market context.
Benefits of Selecting the Right Comparators
Improved Accuracy of Salary Surveys
Selecting the right comparators can help organizations improve their salary surveys' accuracy. This is because comparators representative of the organization will provide accurate and relevant data for salary benchmarking. This, in turn, can help organizations to make informed decisions about their compensation structure and ensure that their salaries are competitive.
Better Understanding of the Job Market
By selecting the right comparators, organizations can gain a better understanding of the job market and the compensation trends within the chosen market segment. This information can help organizations make informed decisions about their compensation structure and ensure that they offer competitive salaries to their employees.
Improved Employee Retention
Offering competitive salaries to employees is a key factor in employee retention. By using the right comparators in salary surveys, organizations ensure that they offer competitive salaries and benefits to their employees. This helps improve employee satisfaction and reduce turnover, which can positively impact the organization's bottom line.
Improved Recruitment
Offering competitive salaries and benefits is also important for attracting top talent. By using the right comparators in salary surveys, organizations can ensure that they offer competitive compensation packages to potential employees. This can help organizations attract and retain the best employees and improve their talent pool.
Conclusion
Selecting the right comparators is essential for the accuracy and relevance of salary surveys. We propose using a multi-sector survey methodology and considering direct competitors for talent. Your sector-specific companies will be represented in your market profile if you use a survey that includes employers from the national sector.
Logical Zivurawa and Mthulisi Mlilo are Business Analytics Consultants at Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm.