Recruitment surveys and other types of free data allow organisations to perform salary benchmarking. They are usually either:

Self-reported information submitted by individuals to websites such as Glassdoor
Put together by recruitment agencies using advertised salaries, rather than reflecting the final remuneration package agreed on hire

These surveys rely on job titles, but the difficulty is that job titles can have different meanings in different organisations. For instance, an HR officer at one organisation may have much the same role as an HR manager at another.

Paid salary surveys, on the other hand, use a job evaluation process. Organisations look at the content, skills, and responsibilities of each role before matching each one to its relevant function (HR or finance) and survey-defined job level.

When you submit your employee data to a salary survey, the provider often goes back to each participating organisation with questions and queries to validate their job matching. The full database also tends to go through a data cleaning process to ensure the final report is as accurate as possible.

The process relies on participating HR teams having a good understanding of their roles and matching accurately. So, it’s important to pick a good and reliable data source that covers most, if not all, of your roles that you’re looking to include in the salary benchmarking process.

The data is by no means perfect, but our objective is not to take a formulaic approach linking base salaries to external market data. It is valuable data and insight, enabling our leaders to make more informed pay decisions.

What Are Medians, Quartiles & Deciles?

Median Salary Data

The median salary represents the mid-point in a data sample. Let’s say 11 organisations have a project manager role. If we rank the salaries of these employees from lowest to highest, the organisation that sits in the middle (ranked 6th) is the median salary.

Let’s assume that in the following year, two new companies join the survey and there are now 13 companies with a project manager role. If the new companies are the highest-paying companies, they will now be ranked 12th and 13th. Now the median salary is from the company with the 7th ranked salary in the sample.

Even if there have been no pay increases since last year, the median salary will have gone up. This is how surveys work with new companies participating each year and others dropping from the sample, resulting in changes in the data. Therefore, we shouldn’t take a formulaic approach to salary benchmarking but use it to make sensible and informed pay decisions.

Quartiles & Deciles

Most salary surveys publish lower (25th percentile) and upper (75th percentile) quartiles, as well as the market median. The best way to think about this is to imagine a data set of 100 employees, each with a unique salary. These salaries are placed in order from the lowest to the highest.

The 25th highest salary in the sample, also known as the 25^th percentile, is known as the lower quartile. The 75th highest salary, or the 75th percentile, in the sample is known as the upper quartile. Quartiles sort data into four quarters. You may see them referred to as LQ or UQ in data samples.

Some surveys may also publish deciles to give you more insight into market salaries. Deciles sort data into ten equal parts. The 10th highest salary, or the 10th percentile, is the 1st decile. The 90th highest salary, or the 90th percentile, is the 9th decile in the sample.

Salary Benchmarking Strategy

Before we start to benchmark our roles against the external market, we need to have a strategy.

Are you going to position yourself at the mid-point of the market and against the median salary?

Do you want to lead the market with aggressive growth and aim to recruit the best talent by paying closer to the upper quartile (75^th percentile)? There are some organisations that invest in other areas or feel they have such a strong brand that they may position their salaries below the market at the lower quartile (25^th percentile).

You can even have a market median reference for most of your roles, but for a few critical and highly technical roles, position yourself at the higher end of the market.

Whatever you decide, there needs to be a clear strategy consistently applied across the organisation. The benchmark data you use forms a critical part of your annual pay review process when the salaries of your employees are reviewed and likely to progress.

Written by Rameez Kaleem

3R Strategy is an independent reward consultancy helping organisations to build a culture of trust through pay transparency. Book a free discovery call with us today.