How can employers update compensation survey data?


You'd like to develop a new pay structure to begin October 1, 2006. You've located an appropriate salary survey for jobs in your market, which was published in March 2006 with data effective December 1, 2005. Is there any way to compensate for the market movement that occurs between December 1, 2005 (the date for which survey data is effective) and October 1, 2006 (the date for which the data will be used)?


You can compensate for this by using an aging factor. This takes into account the market movement that occurs during the lag time. Here's how the process works.

Step 1: Identify the effective date of the survey's data—in this case, December 1, 2005.

Step 2: Determine the lag time in months between the survey data's effective date and the date that you intend to use the data—in this case, ten months.

Step 3: Determine the annual market movement. Some companies use the Consumer Price Index), but that only reflects inflation in terms of a market basket of goods. Other companies use salary surveys to get that figure—for example, the Bureau of Labor Statistics’ Employment Cost Index. Employer or industry associations may be an additional source for determining the market movement.

Step 4: Determine the monthly market movement by dividing the annual market movement by 12. Assuming an annual market movement of 3 percent, the monthly market movement is 0.25 percent (3 percent divided by 12 equals 0.25 percent).

Step 5: Determine the aging factor by multiplying the lag time in months (Step 2) by the monthly market movement (Step 4). Thus, in this case, the aging factor is 2.5 percent (10 times 0.25 percent equals 2.5 percent).

Step 6: Multiply the survey data by the resultant aging factor—in this case, 2.5 percent.

Source: CCH Human Resources Management Compensation Guide ¶4293A
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