09: Evaluating the Market

Survey Says: Show Me the Money

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What is the best way to determine pay increases for employees?

For most organizations, calculating pay increases are included as part of an annualized budget planning process. On the face of it, budget planning appears to be pretty simple – money in vs. money out. How much money do we have to spend? Where are we going to spend it? What are the revenues? What are the expenses? What is the time frame for the upcoming budget plan? Is there a need for a contingency plan? Suddenly, the appearance of budgeting simplicity starts to become more complicated as we have to go through the assessment of multiple and competing expense priorities.

Paying employees must be at the top of that priority list.

While pay decisions do take affordability into consideration, they must also be aligned with workplace pay increase expectations. This is where the importance of data collection, through salary and compensation surveys, comes into play.

Most employees do have an expectation that their pay will be adjusted in a positive way from year to year. This is highlighted in a recent salary survey which showed that Canadian workers expect to receive a pay increase in this current year (2019) based on a number of variables. Specifically, the survey indicates a 2.8% salary increase is expected in Canadian workplaces.

Click here to read the results of the survey.

As we know from our compensation studies, data collection and survey results do provide fact-based evidence that employers can use to make pay decisions. Whether or not the employer can meet the demands arising from survey data sets up another complication in the budget planning process. While employees may expect to see the money, the employer may decide that it can not afford to show it.

Discussion Questions:

  1. How can these types of survey results influence organizational pay strategy?
  2. As an employee, how would you justify requesting an annual pay increase in excess of 2.8%?
  3. From a compensation management perspective, how would you justify giving your employees less than an annual 2.8% wage increase?

Compensation Data

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How do you evaluate the labour market?

business documents on office table with smart phone and laptop computer and graph financial with social network diagram and three colleagues discussing data in the background
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An organization’s compensation system is only as good as the data it has available to evaluate the labour market and the quality of the sources of the data. It turns out a good source of third party compensation data is the payroll companies. Take ADP for example.

Click here to read this USA today article.

There are some interesting labour market trends happening in the USA. According to ADP, about half a million U.S. workers left one job for another in the fourth quarter, up from 406,000 in the same period in 2015 and 365,000 two years ago. But ADP in the Department of Labour can give HR greater insight with information like this, as ADP also finds that more workers are shifting into new sectors, such as a marketing manager who leaves retail for finance.

HR needs to be aware of this type of data and trends. This type of data is suggesting that the USA is a long way away from the 2008 recession where they had their pick of employee talent. With this type of worker volatility of switching industries and not just jobs, combined with a USA unemployment rate at its lowest level in 43 years, these factors will surely affect an organization compensation system.

Discussion Questions

  1. What is Canada’s current unemployment rate? How will this affect an organization’s compensation system?
  2. Identify two other Canadian sources of Labour Market Data. Look them up and determine some of the labour market trends currently in Canada.

Let the Data Tell the Story

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Trying to figure out where to begin for effective compensation planning is challenging. The end result of a good compensation plan is the alignment of the plan with the expectations of those who are going to use it. Before we can get to the end, however, we must understand, from the beginning, whom the plan intends to serve in order to design the plan to meet these expectations.

Who is in the target market?

Of course, part of analyzing the market will focus on the existing workforce within the organization. This provides us with a short-term view based on immediate workforce needs and expectations. However, the investment of time and resources used to build an effective organizational compensation strategy must look to the long-term goal for sustainable results.

Who in the target market will benefit from a long-term vision? We can find answers to this question through market surveys that shape and guide the path to the future.

A recent example of this type of market survey focuses on the value-based expectations of the millennial workforce.

Click here to read the article.

Click here to read the full report.

The data provided in this report is just that: data. The charts and graphs on their own provide the basis for analysis. Analysis comes from translating the data into meaningful information. In this case, the data is used as a base to build a compelling story that tells the tale of what the millennial worker expects from their future as a valued participant in the Canadian workforce. The results of this report should lead to a natural conclusion that the long-term vision for sound compensation planning must be based on the growing needs of the millennial workforce.

Data analysis and market surveys help anchor the development of compensation strategy at the beginning. It is up to the thoughtful compensation practitioner to use this information effectively in order to implement a sound compensation structure at the end.

Discussion Questions:

  1. Based on the survey data in the report, identify three effective elements of a compensation plan that will meet the needs of millennial workers.
  2. How can market surveys be used to provide short-term planning for compensation design?
  3. How would you use this report on the millennial workforce to shape the compensation plan in your current place of work?