If you're looking for a job or trying to negotiate a pay raise, you may be tempted to use one of the many salary calculators on the internet. You know, the ones where you enter your job title, hit the "search" button, and presto--discover that you should be making $5,000 more than you are.
When you bring this information to your boss's attention, expect him--like you--to check out these salary calculators. One thing he may discover is that SalaryExpert.com says "Clearly free salary data is not accepted within the professional community of analysts and compensation benefit managers."
Your boss may also discover other factors that don't inspire confidence in salary calculators:
Salary.com "provides employer-reported benchmarks to determine the salary range for their title and job description." So do you think these mysterious benchmarks will inspire your boss's confidence in the data? Or that he will be inspired by Salary.com's misspelling of "relevant"?
SalaryExpert.com "Our primary data source is always the federal government...We cannot attest to the accuracy of some national data since it is single-sourced and is not cross-checked." Can you see why a boss might not trust this source? Other problems that SalaryExpert mentions about its data:
- The occupational wage rates in this report are estimates derived from a sample survey. Two types of errors are possible in an estimate based on a sample survey--sampling error and non-sampling error.
- Since not every occupation appears on every industry-specific form, there may be a bias in the employment and wage data for some occupations. The extent of this bias is unknown.
- Another source of potential bias is the limitations placed on the size of the benchmark factors.
Even though salary calculator data is not trustworthy at least there's something to be learned. Salary.com explains why your salary may be lower than what it calculates:
- There are a number of valid reasons why your current compensation may be lower than the market data in the Salary Wizard....being lower than the market numbers shown does not necessarily mean you are "under paid."
- Note that if a job description is a "pretty good" match but not perfect, the differences in the skills, experience, and knowledge could translate into a difference in market compensation.
- If your current compensation is below the salary market data in the Salary Wizard, it may be a result of your particular company...offering better-than-average benefit programs.... You may be surprised to discover the breadth or value of the benefits your company offers.
- It is most common for the industry of the company to influence the pay.... For example, senior people in the manufacturing industry historically have been paid lower than people with comparable jobs in the financial sector. ...if your industry is a lower paying one, you may expect your pay to be lower than the salary market data in the Salary Wizard.
[Update: On 1/18/09, I came across this comment posted on Brazen Careerist. This person (Chester Bunny?) was replying to the post Figure out how much you should be paid (and three cheers for transparent salaries). I copied it below because it supports my disdain for internet salary calculators.]
"Penelope (not your real name) - I'm a professional compensation analyst. I have my MBA and an alphabet soup of professional certifications in this particular field. I appreciate anything that's published about compensation programs, because it's my absolute passion in life.
I'll be the first to tell you that there are most definitely companies out there that make compensation mistakes and try to keep them covered up. (This is wrong and I don't condone this behaviour, nor would I continue to work for a company that knowingly violates the law.)
However, what I saw of your business sense on 20/20 this past Friday night, as well as this blog post AND your comments on the above companies really frightens me.
You are SOOOOOO undereducated in this arena of HR/business management that I'm confident in asserting that you're dangerous to your readers. You need to disclaim that you have only a surface level understanding of compensation theory and administration instead of pretending to be some incredible thought leader. Nothing that you said above is new or insightful. Compensation professionals talk about and study this stuff all the time.
I've worked with both Salary.com and Payscale.com; neither of them has entirely reliable salary data -basically, their data is NOT TRANSPARENT. (Isn't this one of your primary arguments above?) Of course, you'd have to have some actual expertise in this arena to understand this and it's clear you do not.
One of the primary rules of compensation analysis and management is to use data that you can readily understand (not unlike prudently investing in companies with business models that you can understand). Another one is to never rely on only one data source.
I, and other professionals in this field, regular mock these two data providers because so much of what they publish is inaccurate. Sure, they get some common benchmark jobs right, like accountant and software developer, but they get much more of it wrong. In one way I appreciate that the existence of Salary.com and Payscale.com because they get people excited about a topic I love so much. On the flip side, I get to spend a lot of time counseling employees on why the data they bring to me is skewed. Examples of skewed data include:
- employees improperly matching themselves to survey jobs they found on the interet,
- ignorance about their own development needs to progress to the next professional level,
- a lack of understanding between cost of living and cost of labor,
- incorrect algorithms used used by these internet sites for determining "geographic differentials",
- litte to no knowledge of their company's chosen compensation strategy [i.e. lead, lag or lead/lag]
Should you actually want to learn information on compensation program development & administration then please check out some respected professional organizations: Society for Human Resource Management (www.shrm.org) or WorldatWork (www.worldatwork.org). The membership base of these organizations is made up of professionals and academic folks who spend the majority of their time researching these issues and working in the real world."