The Growing Importance of Market Data in Compensation

In the past, an annual survey was enough for a company to create a compensation strategy. But with industry dynamics changing faster than the stock market, data can often be outdated within weeks. 

The risk this poses is that it leaves you reactive instead of proactive. As an HR or Compensation leader, you need to rely more on real-time information and stay ahead of market shifts. 

Data-backed compensation strategies use insights from a range of sources—salary surveys, competitive analysis, industry reports, and even internal workforce data—to ensure your compensation structure aligns with market realities. These strategies can maintain your attractiveness to top talent and avoid the costly mistake of under or over-paying people.

To effectively create data-driven compensation strategies, you need to factor in some current trends:

1. With remote and hybrid work models becoming the norm, geographic pay differences are evolving. For example, based on demand for talent, pay rates have accelerated faster in certain areas such as Austin, Seattle, Denver, and Washington as compared to New York or San Francisco. As an action, you can use real-time market data or living wage calculators like MIT’s, to track regional pay trends and adjust compensation for remote workers.

2. Compensation is increasingly being tied to specific, in-demand skills rather than traditional job titles. Companies in tech, healthcare, and other rapidly evolving industries are offering premiums for skills in areas such as data science, artificial intelligence, and cybersecurity. To address this, collect data on in-demand, ‘hot’ skills to understand market rates for them. This will allow you to adjust salaries based on skill sets and ensure you stay competitive in attracting niche talent.

3. The recent surge in inflation has increased the cost of living in many regions worldwide. People are expecting raises and salary adjustments that keep pace with inflation. Communicate your compensation philosophy clearly and factor in the cost of living adjustments. Use economic data from trusted sources or real-time compensation analytics platforms to monitor inflation rates and stay aligned with the market.

4. Pay transparency laws are emerging not only in the US but in other parts of the world as well. Consider conducting a pay equity analysis to check for internal and external alignment with laws as well as market practices. A data-oriented approach to pay equity will ensure that you can adjust your budget to what aligns perfectly with what people need.

Conclusion

Incorporating data-backed compensation strategies is no longer a luxury but a necessity. If you wait too long to include evidence-based analysis in your compensation, you run the risk of being left behind by the competition. 

But by using real-time data and predictive analytics, you can align your pay structures with market trends, ensuring competitiveness and fairness. This proactive approach to compensation allows you to attract and retain top talent, respond swiftly to changes in the market, and build a reputation as a forward-thinking employer.

As they say, “if you fail to plan, you plan to fail”.

To get the right return on your investments in people through the power of data, reach out to us at [email protected].

About the Author

Sumit Singla

Founder of eleventHR Consulting.

Sumit has been working in HR & HR consulting roles for 16+ years across sectors and verticals and specializes in organization design, wellbeing, storytelling & design thinking, and performance management. In his career with consulting firms such as Aon, Deloitte, and Accenture, he has successfully led programs aimed at total HR transformation for clients. Recently, as Associate Director for India Consulting at Deloitte, he worked with clients on cultural transformation and HR process and policy design. He also organized and spoke at conferences and events about a variety of topics relevant to HR today. Now self-employed, he works with clients across the globe on a variety of HR solution areas.

Howard Nizewitz 

Howard’s extensive expertise in compensation management comes with a 25-year track record of implementing strategic and successful compensation programs in the financial services and technology industries with a global and regional focus. His tenure includes positions at Barclays, Citigroup, and JPMorgan. Other areas of expertise include HR consulting, Deferred compensation, incentive plan design, and talent management. If you want to learn more, please contact Howard at [email protected] or schedule a free consultation on the compteam.net website.