For most organizations, payroll is the largest budget line item; therefore, it’s critical that founders and leaders set the right compensation strategy. In order to achieve business goals, companies need to attract and retain the right talent. To do so, they need to establish a compensation philosophy and corresponding market positions for their roles. Once those are established, the company will most likely need a compensation-related solution or provider to support the execution and management of its compensation strategy. But, selecting the right partner can be daunting as there are several different support solutions to choose from.
Broadly speaking, there are three main types of compensation solution providers:
If your compensation strategy is set, you’ll want to ensure you’re paying fairly and competitively, which means you’ll need market data. There are several options in this space, so conducting due diligence is a must. Each survey provider will utilize a different approach to aggregating their data, so ask questions about where their data sets come from. Make sure the provider uses validated sources and that any roles specific to your industry and company are included.
An internal analyst is necessary to manage a successful compensation strategy when working with traditional survey providers. The analyst will need to manipulate the data so that it makes sense for recruiters and hiring managers to use. Often, the compensation ranges from survey providers are not normalized, meaning the progression of ranges doesn't align (e.g., compensation ranges for level 4 may be higher than those for level 5 for some job families). The scope of normalizing the data can take several months, depending on how many job families, locations, and market percentiles your company uses, so be sure to build these processes into your project timelines.
Working with some survey providers might also mean that you’ll have to build out tech stacks or have a dedicated consultant to support establishing compensation ranges, which come at an additional cost.
Administratively managing salary surveys is a full-time job. If your company doesn’t currently have an internal analyst, plan to budget a salary range between $83,000 and $115,000 (for a compensation analyst with up to 4 years of experience, in the United States, in the 50th percentile).
Many big consulting firms provide market data and strategic advising services. They can be a good option for larger companies with big budgets, as projects can be expensive. Projects can include executive compensation benchmarking studies, especially for public companies who want to use a peer group of companies to benchmark against, and detailed pay equity studies.
Smaller (i.e., boutique) consulting firms or independent consultants can also be an option for companies with tighter budgets. When working with either, you will likely need to purchase market data from a survey provider as an additional expense.
Once the project is over, your company becomes responsible for sustaining the recommended compensation processes or the deliverables (i.e., spreadsheets). This, again, typically requires a dedicated in-house analyst who would maintain the compensation ranges and employee job matches once the engagement is over. It may not be a scalable option for fast-growing companies when you need ranges for additional jobs or locations.
There are increasing tech products in the compensation management space (“comp tech”). As with many business segments, new technologies like machine learning enable providers to provide market compensation data and manage compensation more efficiently and accurately than in the above examples.
When choosing a comp tech, the first step is to look for the best, reliable market compensation data that aligns with your industry and reflects the pool of talent from which you recruit.
Finding the right software partner requires research, and broker-model companies, like OutSail, can provide competitive analysis for HR tech at little or no cost to the buyer.
With so many new tools in the market, it’s vital to know your unique priorities and how each solution can cater to your needs.
Compensation is an ongoing journey that companies should evaluate and revisit at regular intervals. Resource constraints typically limit HR’s ability to comprehensively analyze the company’s pay initiatives. Knowing your compensation priorities ahead of each vendor introduction meeting is essential to making the right decision for your company.
Kamsa is a hybrid solution that provides global market compensation data and consulting to support your company’s pay decisions. Kamsa’s compensation experts guide you through the process, from conducting job leveling to helping articulate your compensation philosophy to building your compensation ranges; we provide a holistic, one-stop shop for compensation needs.
For a demo of Kamsa, contact us here.