7 Steps Toward Pay Equity – Installment #3 – Data Collection: Wage Comparability Study
Ever wondered how organizations can develop fair and equitable pay for employees? We’ve got answers!
For some background on this series, please see Installment 1: Overview and Key Steps and Installment 2: Data Collection Begins – Pay Scale.
Wage comparability studies are available for all key sectors (public, private, nonprofit).
A wage comparability study contains external compensation data for various positions. It complements an organization’s internal pay scale.
These studies are used to benchmark salaries, so leaders can determine competitive market wages for their geographic region, type and size of organization, and each position. To maintain the accuracy and relevance of this tool, update the data every 2-3 years.
In our experience this is a time-consuming and detail-oriented task. Whether staff time is used to conduct a salary survey and undertake a wage comparability study, or an organization purchases a ready-made study/survey, there will be costs associated with this exercise.
Purchase wage comparability studies or single position report data
- Society for Human Resource Management (SHRM) Compensation Data Center
- State Compensation Reports – Analysis of Associations and Nonprofits
- Wage and compensation studies prepared by private sector companies (fees vary)
Conduct a wage comparability study
You can develop a custom study by gathering and documenting 4-6 external sources of salary and wage data for each comparable position in your organization.
Tip: Copy your pay scale worksheet (see a sample in Installment 2) and change the column headers to reflect each wage comp data source chosen. Empty the data fields and save the custom template as a tool for future use.
Salary and Wage Data Sources
- U.S. Bureau of Labor Statistics
- State Departments of Labor, Industries, or Employment
- Regional wage data published by nonprofit organizations, consulting firms and state associations
- Similar organizations that publish salary data, or would provide it upon request for this purpose
- Use data from organizations in the same sector as yours for comparison whenever possible. Alternatively, make consistent adjustments for public and private sectors, where employees are typically paid more than in the nonprofit sector, due in part to the more well-developed infrastructure and accessible cash flow of businesses and government units.
- Be thoughtful about the size of organizations used for comparison (i.e. don’t compare a university to a 501(c)3 nonprofit with a $250,000 annual budget).
- Adjust for geographic area when necessary. Wages are lower in rural areas than in urban areas, and higher in some regions (like coastal areas) due to the higher cost of living.
- Keep notes to identify where external sources could not provide information on a position, and/or where alternate sources of data were used. This is invariably the case, as every wage comparability study is different, and none will exactly reflect your org chart.
- Add an average column to your wage comp study. Calculate each position’s average pay across sources.
Good description of labor market analysis from UC Davis.
The Office of Head Start requires Head Start grantees to conduct wage comparability studies, and they’ve developed a comprehensive guide for the process of comparing employee wages and fringe benefits using employee surveys and external data.
Next week I’ll offer tips on how to analyze all this data in meaningful ways for decision-making.
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