US businesses are in the midst of a great resignation, or at least a great rethinking of how work is completed. Even happy employees may look at the projected inflation of six percent and start to wonder if something better is out there. Small business owners already know how hard it is to find the right person who is well suited to the company’s unique culture and has the technical skills to advance the business, so what can they do to retain employees in those key roles?
One proactive approach is a targeted market study – meaning a compensation scan limited to one or two key positions for small employers, or one or two departments for larger employers.
STEPS TO CONDUCTING A MARKET SCAN
- Define the role as it is known in the market. For example, a role might be the business jack of all trades, doing everything from graphic design to monitoring office supplies to calling for facilities maintenance. In this case, capture those functions as the outside world knows them – Graphic Designer, Executive Assistant, and Facilities Administrator. It’s okay to combine titles when a person fills more than one role by weighting them according to the time spent on the individual duties.
- Gather market data from at least three sources for the titles gathered. There are many websites where compensation data is available, although this data should be used with some caveats. Compensation data available on websites is generally employee-reported, so it does not have the same level of validity as an employer-reported salary survey. But this data can be useful in determining what the employee is likely to see if they were to look online. Strive to have at least one source that reports on the specific industry.
- Weigh the data (if using more than one title) and ensure the geographic area is accounted for in the market information. Even if the position is remote, the location of the employee (or where future employees will be hired) should be taken into consideration since this is a scan of the labor environment. Including a geographic differential will account for competition with the local labor market. Average the weighted data for a market target and determine where the employee’s salary is in relation to the target. Is it above, below, or is it right on track?
- Determine if an increase is in the budget. Base salary increases are expensive because they are built upon over time. If it’s not in the budget, businesses have other one-time options available for rewarding and recognizing employees, including a lump sum payment or additional paid time off.
Keep in mind that compensation is subject to legal protections that vary by state, and internal pay equity should be considered and reviewed carefully, especially when the role is not new. Generally, pay equity laws allow for differences in compensation for employees in the same role based on tenure or merit-based increases over time are permissible. For small employers, this means it is okay to pay the star performer more than the average performer, if there is documentation and consistency in your compensation practices to support the difference.
WHEN A MARKET SCAN IS COMPLETE, WHAT’S THE BEST WAY TO COMMUNICATE THE INCREASE TO THE EMPLOYEE?
Just say it.
Example: “We looked at market pressures, including inflation, because you are a valuable part of our team. Specifically, we really appreciated your attention to detail on the XXXX project. We are adjusting your salary to reflect the important contributions you make every day and look forward to continuing a strong relationship. Thank you!”
Interested in other current employment trends? Click the link to view the recent blog: 10 Ways to Promote Mental Wellness in the Workplace or check back for more on human resources, payroll, insurance, and benefits.
This article does not constitute legal advice. It is strongly suggested that you seek consultation or legal counsel before making decisions about policies.