Using Internal and External Pay Data to Determine an Employee’s Pay

It isn’t always easy to determine how much pay your employees should receive. The process to determine this isn’t random or subjective. Instead, employers rely on pay data to make their pay decisions.

This pay data can come from internal or external sources. In this article, we will explore what these internal and external pay data sources are and how employers use them to determine an employee’s pay. Let’s begin, however, by outlining what pay data is.

What is Pay Data?

Pay data refers to information relating to the compensation and benefits of different job roles. As mentioned already, there are two main sources of pay data: internal and external.

Employers receive internal pay data from their own organization. This pay data includes the salaries and wages that you pay your current employees. You can use internal pay data to determine whether your employees are being paid fairly based on factors such as job responsibilities, experience, performance, and more.

Employers use external pay data from outside sources. From salary surveys to government reports, they provide employers with information on what the market rates are for different jobs. Employers can use this data to measure how fairly they are paying their own employees.

Utilizing both internal and external pay data is key to making fair and equitable pay decisions. When you use pay data effectively, you can be confident in the pay decisions that you make for your current and future employees. Doing this gives you the best chance to attract and retain top talent.

Using Internal Pay Data to Set Compensation

If you’re unsure of what to pay an employee, you can use internal pay data to look at what you pay employees in similar positions. When you analyze pay ranges and actual pay rates within your organization, you can gain insight into what a typical salary looks like. Do this effectively and you will be able to offer fair and competitive compensation packages.

Here are some things you should consider when evaluating internal pay data:

Pay Ranges

Finding out the minimum and maximum pay rates for comparable positions is key when evaluating internal pay data. You should ensure that the range you determine is at a fair level for the roles you look at. This can help you make well-informed pay decisions.

Employee Tenure and Performance

If an employee has spent many years and is successful in their role, they may be at a higher end of the pay range. It is important to keep this in mind.

Location

The pay rates for jobs can vary by location. One of the reasons for this is that some areas have a higher cost of living than others. As a result, salaries may be influenced by the location of where the job or company is based.

Recent Salary Increases

If there have been recent raises in salary in similar positions, make sure you account for these in internal pay data.

By analyzing internal pay data thoroughly, you can make the best pay decisions for your employees. Determining a fair and competitive salary range for a new position can be tough. As this is the case, most employers choose to use external pay data in collaboration with internal pay data to make the best-informed pay decisions.

Benchmarking With External Pay Data

When determining an employee’s pay, you can use external pay data for benchmarking purposes. From salary surveys to government data, there is a wide range of sources for you to get external pay data from. If successful, you can effectively benchmark pay ranges against other companies.

Here at Salary.com, we can provide you with compensation market data from more than 15,000 job titles across 225 industries in the U.S. When using this, you can look for data that matches your organization’s needs and find pay data that is relevant to you.

You should consider the job responsibilities and requirements for the role when seeking out information. This allows you to get the most accurate and up-to-date pay data possible. Now that you know this, let’s look at how you can combine internal and external pay data to make pay decisions.

Combining Internal and External Pay Data for Pay Decisions

Using internal and external pay data to make pay decisions helps you have a well-rounded view of compensation. Combining both types of data along with the specifics of a position and candidate is the best way of determining a pay rate. Balancing these internal and external factors for pay decisions takes some time and consideration, however.

You can use internal pay data to give context to your organization’s compensation philosophy. Alongside this, you can use external pay data to ensure that you are competitive in the market. By blending multiple data sources, you can sufficiently inform your pay decisions.

By being fair in your compensation practices, you can be competitive in the job market. When this occurs, you can attract and retain top-quality talent for your organization. So, what are you waiting for? Start utilizing internal and external pay data for your pay decisions today.