What is your preferred measure of pay movement?

Trends 0915Whenever we release the results of our twice yearly pay surveys, the question we are invariably asked to comment on is “what was the average Base Salary increase for . . . ?”

It can be inferred from the question that the answer is intended to provide some guidance on how far to increase pay rates within the organisation which asked the question.

While we do measure the average increase in Base Salary for all positions and groups within the survey (Industry, Asset value, annual Turnover, Location for example) it is not intended for use in this way, and there are significant risks of overpayment when this statistic is used in this way.

The problem with the Base Salary movement figure is that it combines the effect of two different influences: the impact of any adjustment in underlying pay structures (for example, as a result of a contract settlement), along with movement up a pay scale to recognise performance, contribution or service. The combined effect is to lift Base Salary movements above the level of adjustment in the underlying pay rates.

As part of our twice yearly survey we also report on the movement in Median Total Remuneration for survey groups. As this measure takes into account not only increases for current staff as above), but also the impact of staff turnover (new appointees are often paid at a lower level to the person being replaced) and changes in the value of benefits (particularly in the level of variable pay received) this measure provides a reliable indication of the change in underlying value of the role or group.

BaseSalary 0915To illustrate, our September 2015 survey (released to clients on 11 September) shows that the average increase in Base Salary for Top Executives and General Staff was 3.7 percent and 3.4 percent respectively in the twelve months to 1 September 2015 (coincidentally, these are the same as the figures recorded twelve months ago, showing just how stable Base Salary movements have become since 2010/2011, as illustrated here).

In the same period however, Median Total Remuneration for Top Executives moved by just 1.5 percent, while for General Staff the movement was even lower, at just 0.5 percent. Clearly, with such low levels of increase in Median Total Remuneration, increasing pay structures by the Average Base Salary movements (3.7 and 3.4 percent) would be generous – and probably unnecessary.

Users of the MHR RemData service have the best of both words, with access to current information which provides a basis for better informed decisions to be made on pay adjustments:

  • The movement in Median Total Remuneration provides a basis for adjusting pay structures (or pay ranges for individual roles)
    • In recent years these adjustments would be moderate, given the financial constraints faced by many employers
  • The Average Base Salary Movement provides an indication of the level of increase potentially available for employees, when both movement in underlying rates, and performance and contribution are taken into account.

As the latter figure is generally higher than the former, this approach provides considerable flexibility to recognise and reward those employees who continue to contribute to organisation performance, while still maintaining alignment with the preferred market segment (or segments).

September survey Results:

Results of the MHR RemData remuneration survey were released to licensed users on 11 September 2015.

Contact MHR Global should you wish to discuss access to these results.

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