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Be Cautious of Salary Calculators

Salary calculators and data

Have you ever been unsure about how much you should pay someone? Many employers think the solution is a no-brainer – just Google the position or search for a salary calculator, plug in your information about the job and the candidate, and with the click of a mouse, presto, you have your number. Unfortunately, as with all other content on the internet, it can be difficult to know whether you can trust what you’re reading. So how can employers tell the difference between reliable salary sources and erroneous ones?

Credibility is key

If the salary calculator you’re using is on the website of an organization you’ve never heard of, chances are it’s not reliable. Add to that the fact that there are also so many salary calculators out there and it’s easy to see how overwhelming it can be to determine which one is best.

Essentially, if you have to use a salary calculator at all, use one that was built by a well-known organization specific either to your particular industry or to the human resources industry. However, even then, you may find that you have more than a few choices – and what do you do if you end up with too many inconsistencies?

Don’t dismiss the data

The credibility of any kind of salary guide depends on the data used to formulate the numbers it presents to you. This data should be derived from several factors, including an organization’s size, its location, local trends in supply and demand, candidate education level, and just how many individuals were surveyed to collect the data.

There are also questions surrounding the interpretation of jobs. One salary guide may call one position by one title, while another salary guide uses the same title for a role that’s quite different. Or you may see two very different titles and assume they’re different jobs when in fact they’re not. “It can be difficult to find a position that is an appropriate match to the one you’re trying to fill if there isn’t a detailed job description,” warns Sara Warden Merkley, Adecco’s own Compensation and Benefits Specialist, particularly when it comes to salary calculators. “You want a salary guide that is transparent about where it got its data. Many agencies that offer salary guides, like Adecco, use validated third-party researches to collect that data. But even then, it needs to be reviewed and verified by subject matter experts, including recruiters working the frontlines in various locales.”

The consequences of an inaccurate salary calculator

One of the biggest pet peeves of any employer is employees who feel they should be paid more than what’s offered – and probably because they got their information from an inaccurate salary calculator. Such instances stress the importance of having a trustworthy salary guide to turn to. “If an employee approaches you about salary information they’ve found online, you can refer to your guide and show the employee how their compensation was determined based on company size and geography,” says Sara. “You can also explain where they are positioned in the salary range based on other factors, such as experience and education.” Additionally, unlike a well-researched guide, salary calculators can exclude vital compensation components. “Online tools may not take into account variable pay programs like our figures do,” says Sara. “There’s also a section in our guide that talks about the importance of offering a total compensation package, which includes other forms of compensation, such as an RRSP, pension plan, and other employer-paid benefits.”

Likewise, when employers themselves rely on salary calculators, they run various risks, including overpaying or underpaying their employees. Such discrepancies can lead to employment equity issues and high turnover. “The biggest risk is turnover,” explains Marla Goddard, Human Resources Manager at Adecco, “but not correctly paying certain people can also lead to general employee dissatisfaction, poor morale, and poor performance – all of which impact your bottom line.”

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