3 Ways to Determine a Job’s Market Value
A number of employers have trouble calculating how much to pay potential employees based on a job’s market value. While this is unsurprising due to how complicated the process of determining fair compensation can be, it can also be quite problematic. Employers who don’t have enough information about salary and benefits trends in a specific industry or who base compensation on insufficient data or low-quality data could find themselves in one of two predicaments: they might find they only have low-caliber applicants applying for the position, but they could also find that they are overcompensating in an attempt to bring in a higher caliber of applicant. In order to prevent these potential problems, an employer should consider these three ways to determine a job’s market value.
Determine the Specific Job Responsibilities
When finding information on a job’s market value, it is not enough to base research on a job title. Job titles and duties vary greatly between companies. An accounting manager at one firm might have an entirely different job description than one at another firm. Even if job descriptions are similar, employers must consider other factors. Education, certification and to what level an employee will be expected to perform all determine how much he or she should be compensated, so it is important to decide in advance what is expected from a possible employee in regards to these factors. Creating a solid job description before proceeding with researching market value will keep employers from undercompensating or overcompensating any potential employees.
Employers who are in a hurry to hire someone might decide to base their salary offer on a ïbenchmarkï job ï that is, one with a clear description that isn’t likely to vary much between locations or companies. While it isn’t the best method, sometimes it is unavoidable. Employers who use benchmark jobs to decide on employee compensation should ensure that at least 70 percent of the job’s duties and responsibilities match what is expected from any potential employees.
Utilize Correct Compensation Data
Compensation data can and should come from a range of sources when determining a job’s market value. One valuable resource is the United States Bureau of Labor Statistics, which provides information on average salaries based not only on industry and job title, but also on company sizes and the location of the position. Compensation packages vary widely based on how large a company is and where it operates from. Someone who works for a small firm in the Midwest is likely going to earn less than someone who works for a large corporation in San Francisco, even if they are performing the exact same duties.
Employers who prefer not to research a job’s market value alone might consider hiring a firm to provide information for them. Consulting firms such as Mercer provide salary surveys to help employers determine how much they should be paying. However, these firms do not come cheap and are usually more useful for larger companies. Small to midsized companies might find websites such as Salary.com or PayScale.com more beneficial. These websites provide free information on a wider scale. While it isn’t as focused as what a consulting firm will provide, it does offer a range from which an employer can start to build a salary and benefits package.
Consider Non-Scientific Data
Some employers and recruiters prefer to couple hard data from surveys with anecdotal information from people who use websites such as Monster.com. While not based on statistics, it is easier to see exactly what people expect and hope for in the ïhere and nowï when it comes to the services they provide. While employers should never base a compensation package only on this information, it does help to build something that will be attractive to potential employees.
Regardless of which methods employers use to determine a job’s market value, it is important to keep abreast of trends. For example, economic recession won’t greatly affect many jobs in terms of compensation changes, but employers who hire investment bankers, analysts or similar positions should consider how recession can disrupt the pay scales. Employers should be sure to reassess their salary and compensation structure at least every three years and to read annual pay surveys. This ensures they keep offering competitive compensation packages that attract the best applicants.
Understanding how to determine the market value of a job is just the first step to creating a company that attracts only the most skilled employees. For more tips on running the best company possible, check out the other tips and tools on Mighty Recruiter.