Although some might say that interpreting the value of salary surveys is like pinning the tail on a runaway donkey, they do have real value if the survey methodology is accurate and statistically sound.
In other words, salary surveys can provide astonishingly useful data for both in-house HR professionals and consultancies where like-for-like sector comparisons are made year-on-year.
It’s worth bearing in mind, however, that HR is an organic entity where so many external variables can impact on even the most meticulously scientific survey. To name but a few: we have changes in local and national economic conditions; overseas’ competition; technological developments and structural shifts within sectors and industries. All of these may skew the comparative results and demand an element of caution in their interpretation.
What the results show
Assuming that the salary survey findings are based on statistically significant sample sizes, the results can have sector-wide significance that can be extrapolated in various ways. The data can certainly form a basis for qualitative analysis from which meaningful conclusions can be drawn.
In many cases, the findings will be unremarkable and reflect very little year-on-year change. The usefulness of salary surveys can be to provide empirical (as opposed to anecdotal) evidence of real change, especially with regard to salary inflation and skills shortages in specific sectors.
This data can forewarn HR professionals of future sector changes or confirm a trend which was beginning to emerge in localised data. Most importantly, the findings of salary surveys will draw attention to where and why salary inflation is occurring, and what can be done to effect a market correction by going some way towards balancing supply and demand for suitable candidates.
The causes of skills shortages are well-known. Some of these include skills gaps resulting from relatively sudden changes in technology and demand for highly specific skill-sets; a scarcity of trained individuals; and by a scarcity of university or other training in a particular field. The solutions to skills shortages are often fairly obvious – but solving the problem is not always so simple or quick.
Skills gaps are typically filled in the short term by contractors, freelancers or internal training. Longer term solutions include university or government initiatives, importing labour, and the poaching of qualified staff from other organisations. It’s the period between emerging demand and fulfilled demand when salary hikes become evident and distort the market. And this is where the evidence of current and future trends provided by salary surveys can be so valuable.
How salary surveys benefit HR policy
One of the main benefits of salary surveys is to provide a benchmark for salary levels when recruiting in specific sectors. The value of this becomes clear when negotiating pay rates to retain existing staff. It is also critical when searching for new staff with the requisite skills to enable a company to operate competitively in its own marketplace.
Salary inflation has an insidious and damaging effect on employers and employees alike. For employers, rising wage bills make their company less competitive which may ultimately threaten its very existence. For employees, inflation erodes the real value of their pay and may drive them to demand a pay rise, or look elsewhere for what they see as a fair return on their skills.
Incentivising an existing workforce with a promotion-oriented career path within the business requires a clear salary structure and one that is based on staged pay increases related to taking on more responsibility, deploying new skills, initiatives and so on. This ordered structure can be thrown into disarray when the inflationary demands of certain workers threaten to create an imbalance.
Industry-wide data from salary surveys give employers (and HR consultancies) the information they need when it comes to setting salary levels. This limits the need to pay over the odds for scarce skills to those occasions where a particular type of worker is essential to the functioning of that business. In short, it brings a sense of realism to salary levels.
Salary surveys talk turkey
Let’s face it: pay is a sensitive issue. With the information provided by salary surveys, HR consultancies and in-house HR departments have a useful reference point that gives them an advantage over candidates in the sometimes-prickly process of negotiating salaries.
Company HR professionals will be reading between the lines of salary surveys. They will be looking at how potential skills shortages may affect future recruitment within their company and what impact this may have on the future outlays on salaries. Significantly, they will have the raw data to hand to justify HR policies around the boardroom table.
Consultancies on the other hand may be looking a little more opportunistically at the survey. The data used to identify trends are, by definition, ‘historic’ – so they may use the information to plot a more effective course of future action. This may apply, for example, in areas where demand is expected (to continue) to rise for a certain type of candidate or skill-set.
Whichever way you look at salary surveys, there’s no denying they bring additional insights to the salaries marketplace. Armed with the facts, the trends, the outlook and opinions on future developments for specific types of work, HR professionals have been gifted a powerful negotiating tool that brings a modicum of sense and stability to an otherwise random process.