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Market Pay Data Can Help or Hinder a Pay Strategy

Irvine, CA, February 15, 2014 --( Businesses often struggle with how to effectively perform a market pay assessment, according to Tom Miller, President of The VisionLink Advisory Group, a compensation consulting firm headquartered in Irvine, CA. As a result, many organizations lose the real value such studies should provide in building a competitive and comprehensive compensation strategy.

“Lots of companies fret if their salaries aren’t ‘at market,’ the VisionLink leader explained. “Should they be? Well…yes and no. Of course it’s helpful to know if you have pay levels that are way out of line with market standards. But remember that those standards come from thousands of inputs (some good and some not so good) from thousands of people in thousands of companies. Of course, such large numbers can help weed out some of the bad data. And if you average different survey sources you again find some ‘happy medians.’ So the data may be helpful, and even reasonably accurate—as far as they go.”

Miller went on to explain that therein also lays the problem, however. “Who’s to say that setting ‘median salaries’ is a best practice?” he asked. “The foundational decision should be to determine what the overall pay package should look like. And this should depend on the company strategy and culture.”

The compensation firm leader will discuss the proper use of pay data in setting salaries and building a compensation strategy in a webinar on February 25, 2014 entitled, “Why, When and How to Use a Market Pay Assessment.” Registration for the free broadcast can be accessed at:

A lot of factors go into setting pay levels—including salaries—and they should be driven by the overall compensation philosophy of the company, according VisionLink’s pay expert. A compensation philosophy takes into account all of the competitive forces that impact an organization’s ability to grow and how it wants to share value with its people. No two companies are going to be alike in defining that kind of statement.

“One company may be smaller and in heavy growth mode,” Miller explained. “It may set salary levels at the 45th to 50th percentile of market pay but provide large upside potential through bonus and long-term incentive plans. A more mature organization might pay at the 60th to 70th percentile, emphasize short-term incentives for middle management groups and long-term value sharing for top tier employees. And these companies may be in the same industry competing for the same customers. The philosophy needs to account for all this and define what the company is willing to ‘pay for.’ ”

With a clearly defined pay philosophy, coupled with a comprehensive compensation structure that defines the plans for which each grade of employee is eligible, business leaders can effectively use market pay data to validate that they aren’t over or underpaying for certain positions. It is a tool that is used to both evaluate current practices as well as determine where the company thinks is should be relative to “the market.” “Ultimately, data is just data unless you know what to do with it,” the VisionLink principal explained.

In making final salary and total pay decisions, a company has to be able to determine the relative value of each position within its organization. Some positions may have more importance in one company than they do in another. If so, businesses need to learn how to perform an “internal equity analysis” and how to “weight” that position as a benchmark against which other job classes will be measured. Here again, the data is useful as a starting point, but doesn’t tell a company everything it needs to know.

Miller encourages business leaders to attend the webinar broadcast on February 25th to get a clearer picture about how market pay data can help or hinder a pay strategy.
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The VisionLink Advisory Group
Ken Gibson

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