Salary Comparisons

Salary comparisons are a tool organizations use to support fair, consistent, and transparent compensation practices. They help establish data-backed guidelines that promote pay equity, simplify salary administration, and create transparency around how pay decisions are made.

Effective compensation policies are built on objective, up-to-date job descriptions, sound job evaluation, performance management, and other relevant factors. Salary comparisons bring these elements together into a practical framework for decision-making.

Salary Comparisons: Internal Equity vs. External Equity

Organizations are constantly confronted by employees and managers with questions about internal compensation levels, known as internal equity. There are also frequent questions about how pay compares with similar roles in other organizations, known as external equity.

Which is more important? Internal equity usually trumps external equity.

Salary comparisons play an important role in determining pay levels, but pay levels alone may not be as important as you think.

We are often asked to conductsalary surveys for organizations with limited budgets and lower comparative salaries. A common concern is whether organizations lose staff, struggle with dysfunction, or have unhappy employees who are constantly seeking other opportunities.

In most cases, the answer is no.

Why? Because these organizations often have strong cultures in which managers create supportive, engaging work environments, and compensation is well aligned internally. Employees do not feel less valued compared to others within the same organization.

Every time we interview staff or conductemployee engagement surveys, we see the same pattern. Employees are unlikely to seek higher-paying opportunities elsewhere if they are:

Happy in their job
Connected to the organizational culture
Doing meaningful and valued work

We often ask, “Would you cross the street to do the same job for another organization for $10,000 more?” Most people say “No.”

Benefits of Salary Comparisons

Salary comparisons offer several key benefits:

They establish pay levels that reflect both the external market and your internal structure. This provides a clear snapshot of what comparable roles earn, and supports informed compensation decisions.
They help reduce costs and improve effectiveness through stronger retention and more efficient recruitment.
They reduce the time and administrative burden on HR and management when making pay decisions.

The Salary Comparison Process

A salary comparison is relatively straightforward and is based on common job families and geographic regions. The results are documented in a salary grid that employees and managers can use to understand pay decisions.

The typical methodology involves comparing similar roles across organizations, sectors, and regions, regardless of job title. Even when job duties are unique, it is possible to make objective, defensible market comparisons.

Establishing a transparent compensation structure based on internal and external salary comparisons creates a strong financial foundation. This approach supportsrecruitment and retention and improves long-term organizational performance.

Relying on historical trends or subjective notions of what “feels right” can quickly lead to resentment, reduced collaboration, and lower morale. Over time, this may result in productivity losses and even legal challenges. Formal salary comparisons help remove these risks by grounding decisions in objective data.

Depending on the type of organization, different methods are used to establish compensation scales. Obviously, you need to know what similar organizations in your industry and region are paying. Equally important is understanding the level of training and expertise required for each role and how that affects your bottom line.

Salary Comparison Structure Variations

Different compensation structures focus less on job titles and more on what employees can do:

Skill-based pay rewards employees as they master defined skill levels.
Competency-based pay focuses on how well employees develop and apply the core competencies required for success.
Broadbanding groups related roles into job families with shared pay ranges, regardless of title.

Most organizations use a combination of these methods to create compensation scales tailored to their specific needs.

Salary Comparison ROI

The return on investment from salary comparisons comes through more accurate and objective compensation decisions.

Human resources costs can account for up to 85% of an organization’s total budget. Salary comparisons help manage this investment more effectively, improving efficiency and profitability. Even a small improvement in payroll management can have a significant financial impact.

Additional savings come from improved retention. Replacing an employee earning $100,000 can cost $100,000 or more when recruitment, onboarding, and lost productivity are considered. Getting pay right matters.

Salary Comparisons Go Beyond Wages

Compensation is no longer just base pay. Best practice today looks at total compensation, including:

Base salary
Bonuses and incentive plans
Group benefitsand pension plans
Non-cash compensation
Vacation and holiday pay
Overtime rates
Living allowances

All of these elements are considered in a comprehensive salary comparison.

A salary comparison is a valuable tool for any organization. If you are looking to build a fair, defensible, and sustainable compensation structure, we are happy to help. Contact us today for a free, no-obligation chat.

< Older Post

Newer Post >