Why local salary surveys are as important as national ones
Fall is compensation survey season and HR departments are swamped with data from vendors across the country, all of them rushing to be the first to market with their results and insights. To be fair, I am among the guilty, having just released six compensation surveys for the Greater Toronto Area and adding more than 2,000 pages of data to the pile.
It’s easy to be crushed under the mountain of numbers, offered in many different forms and templates, with each collection claiming to provide vital knowledge for your practice.
Are there too many players on the market? Are we suffering from salary survey overkill? Absolutely not. Seasoned HR professionals know that both Canada-wide data and market-specific numbers and trends are essential to the HR function of designing competitive compensation packages.
For example, the Sept. 25, 2006 edition of Canadian HR Reporter’s salary survey roundup found consistent national trends. Salaries are increasing faster in most of Alberta than in other centres and provinces, and average salary increases countrywide are projected in the 3.5-per-cent neighbourhood.
This kind of information is useful to national organizations in maintaining compensation competitiveness. Large differentials between markets may represent “talent magnets” that threaten to lure away highly skilled and mobile talent.
However, truly competitive compensation package design also requires as deep an understanding as possible of the conditions in your own backyard. The largest sources of talent recruitment against which you must benchmark are local competitors.
While the big-name national surveys do provide local data, these are often based on a few hundred respondent organizations, meaning data for a single city may only be drawn from a few dozen companies.
For many Canadian cities, there is an alternative source for compensation information: local chambers of commerce or boards of trade.
These local surveys concentrate on the trends and benchmarks that are most important to your marketplace. Quite often, they use much larger sample sizes for the local market than their national equivalents (the Toronto Board of Trade’s annual executive compensation survey, for example, draws information on 1,400 business executives in the city). With more data to draw on, trends and local anomalies can be more clearly identified and tracked. Of course, with the lower costs of concentrating on one target area, these surveys are often much less expensive than local data from a national effort.
Moreover, detailed local data can identify national trends before they start. When leading marketplaces such as Toronto, home to more corporate head offices than any other market, begin to show a shift in compensation practices, it is a safe bet their movements will be emulated elsewhere. Employers in other parts of Canada that want to maintain best practices will create the pressure to follow the leaders.
So, what useful indicators of future national trends can be seen in Toronto today?
The 2006 executive compensation survey shows Toronto executives across all industries received an average pay increase of 4.8 per cent in the last year, significantly higher than the inflation rate of 1.7 per cent and higher than indicated in many national surveys.
Executives in the technology, finance, insurance and business services sector received the highest pay raises, averaging 5.5 per cent, reflecting the powerful rise of the information and communications technology sector in the city and the continuing role of financial services in Toronto’s economy.
By contrast, executives in the transportation, warehousing, communications and utilities sectors, received the lowest average raise at 4.1 per cent. Again, more than double the inflation rate and above the average national wage increase for all employees.
The most useful numbers from a national perspective may come from the findings on bonuses. The 2006 survey found that 68 per cent of Toronto companies now offer performance-based bonus systems. Obviously, the performance-driven compensation concept has taken strong root in Toronto and should be expected to continue spreading as a national practice.
Combining local results like these with information from the large national surveys creates a more complete picture of the present and future. HR professionals need to be aware of national trends, even as they brew in leading markets, and to combine that knowledge with in-depth data about their own marketplaces in order to take action that maintains their organization’s competitive position as an employer.
Mary de Reus is vice-president, business services at the Toronto Board of Trade, publisher of six annual compensation and employment practices surveys. For more information visit www.bot.com or call (416) 862-4515.
It’s easy to be crushed under the mountain of numbers, offered in many different forms and templates, with each collection claiming to provide vital knowledge for your practice.
Are there too many players on the market? Are we suffering from salary survey overkill? Absolutely not. Seasoned HR professionals know that both Canada-wide data and market-specific numbers and trends are essential to the HR function of designing competitive compensation packages.
For example, the Sept. 25, 2006 edition of Canadian HR Reporter’s salary survey roundup found consistent national trends. Salaries are increasing faster in most of Alberta than in other centres and provinces, and average salary increases countrywide are projected in the 3.5-per-cent neighbourhood.
This kind of information is useful to national organizations in maintaining compensation competitiveness. Large differentials between markets may represent “talent magnets” that threaten to lure away highly skilled and mobile talent.
However, truly competitive compensation package design also requires as deep an understanding as possible of the conditions in your own backyard. The largest sources of talent recruitment against which you must benchmark are local competitors.
While the big-name national surveys do provide local data, these are often based on a few hundred respondent organizations, meaning data for a single city may only be drawn from a few dozen companies.
For many Canadian cities, there is an alternative source for compensation information: local chambers of commerce or boards of trade.
These local surveys concentrate on the trends and benchmarks that are most important to your marketplace. Quite often, they use much larger sample sizes for the local market than their national equivalents (the Toronto Board of Trade’s annual executive compensation survey, for example, draws information on 1,400 business executives in the city). With more data to draw on, trends and local anomalies can be more clearly identified and tracked. Of course, with the lower costs of concentrating on one target area, these surveys are often much less expensive than local data from a national effort.
Moreover, detailed local data can identify national trends before they start. When leading marketplaces such as Toronto, home to more corporate head offices than any other market, begin to show a shift in compensation practices, it is a safe bet their movements will be emulated elsewhere. Employers in other parts of Canada that want to maintain best practices will create the pressure to follow the leaders.
So, what useful indicators of future national trends can be seen in Toronto today?
The 2006 executive compensation survey shows Toronto executives across all industries received an average pay increase of 4.8 per cent in the last year, significantly higher than the inflation rate of 1.7 per cent and higher than indicated in many national surveys.
Executives in the technology, finance, insurance and business services sector received the highest pay raises, averaging 5.5 per cent, reflecting the powerful rise of the information and communications technology sector in the city and the continuing role of financial services in Toronto’s economy.
By contrast, executives in the transportation, warehousing, communications and utilities sectors, received the lowest average raise at 4.1 per cent. Again, more than double the inflation rate and above the average national wage increase for all employees.
The most useful numbers from a national perspective may come from the findings on bonuses. The 2006 survey found that 68 per cent of Toronto companies now offer performance-based bonus systems. Obviously, the performance-driven compensation concept has taken strong root in Toronto and should be expected to continue spreading as a national practice.
Combining local results like these with information from the large national surveys creates a more complete picture of the present and future. HR professionals need to be aware of national trends, even as they brew in leading markets, and to combine that knowledge with in-depth data about their own marketplaces in order to take action that maintains their organization’s competitive position as an employer.
Mary de Reus is vice-president, business services at the Toronto Board of Trade, publisher of six annual compensation and employment practices surveys. For more information visit www.bot.com or call (416) 862-4515.
