Human resource professionals spend billions of dollars every year gathering job compensation data using traditional salary survey methods. A quick Google search reveals there are 722,000 job-survey sites and 209,000 salary surveys in its database. Some are formal surveys from trade associates and the government, and others aren’t quite so regulated. Either way, salary surveys aren’t working the way they should be. If they’ve been relied upon for so long, what’s the problem?

1. Salary survey tools are subjective

Because every business is unique, job titles, organizational structures and experience levels are all different. Some companies’ middle-management may be equivalent to another’s senior management, some senior managers may not have the responsibilities of others, and so on. How do you collect relevant data when you’re always comparing apples and oranges?

Moreover, how do you know any data you collect can be trusted? Do you know how the survey was conducted? Do you know if it was conducted in an objective, reliable manner? What was the sampling size and response rate? What is the margin of error? As an example, roughly 25% of non-voters reported having voted after an election. Are your results any more trustworthy?

Let’s say you do know how the data was collected, and you know the numbers are trustworthy. Even then do you know what the exact questions were? Surveys can be written in a certain way to lead respondents down a particular path. The survey itself could be biased and unreliable.

2. Salary survey information drives cost up and quality down

Over 90% of salary engine tools use outdated salary survey methods. They require employees to choose from a pre-determined list of job titles that may not be applicable in their unique workplace. In order to have “useful” data, salary survey companies want a high percentage of matches, although they may not necessarily be accurate.

In order to use this cut-and-paste data, companies have to decide where their employees fit in ‘best’. The best fit approach doesn’t take into account your business’s individual needs and preferences: It doesn’t effectively match skill to skill which leads to higher costs and lower quality.

3. Salary compensation surveys neglect the contingent and temporary workers

Traditional salary surveys go to almost exclusively full-time employees in stable markets. Approximately 40% of workers are contingent, so how are you supposed to get information on them? Salary information, even for stable workers, is difficult to track in an ever-changing workforce and leaves the contingent job market inaccurately captured and virtually ignored.

Uniqueness comes into play here too. By definition, the contingent workforce is always changing and growing: That also applies to their job titles and skill sets. Because contingent workers are so ignored, their often vital jobs go under-appreciated and under-compensated. In 2012, contingent workers had a median hourly rate of $11.95, compared to $17 for workers with standard full-time positions.

When you’re making a huge decision like how much to pay contingent workers (something that will have a huge impact on your company), you can’t afford to trust shaky data. You can’t afford to make the wrong decisions.

Using inaccurate salary survey data isn’t just bad on principle, it can have serious negatives effects on your business. If you’re paying employees too much, then your bottom line will start to suffer. If you’re paying your employees too little, retention and employee engagement become an issue. If you’re paying some workers too much and others too little, you’ve got the worst of both worlds.

About the author: Chrissy Dooley began her career in 1997 as a Technical Recruiter in New York City’s Silicon Alley. Chrissy has worked with PeopleTicker since its inception when it was offered as part of the TAMS VMS software package.

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