Staff Writer 
HR Perspective with Memory Nguwi
SALARY survey data does not provide a direct answer to the question of how much an employee should be paid. It shows what selected organisations paid for selected jobs at a particular point in time. Converting that information into defensible salary decisions requires technical understanding, business judgement and a clear remuneration strategy. Organisations can purchase credible market data and still make poor decisions by selecting inappropriate comparators, matching the wrong jobs or misunderstanding the statistics.
Before using any figures, examine the survey methodology, participating organisations, data collection date, remuneration definitions and validation process. The number of organisations is as important as the number of employees represented. One hundred salary observations from three employers provide different evidence from one hundred observations collected from 30 employers. A large organisation submitting most of the employees can dominate employee-weighted results and create a misleading picture of the wider market.
The survey should disclose whether results are weighted by employee or organisation. Employee-weighted results give greater influence to organisations that submit more employees, while organisation-weighted results give each employer equal influence. Neither method is always superior, but users must understand which one was applied. The survey should also explain how incomplete submissions, extreme salaries and doubtful job matches were treated.
The sample size is the number of valid observations used to calculate a result. Statistics based on small samples are less stable because every observation has a greater effect on the final figure. Small samples may still be useful for specialised jobs, but users should place less confidence in them. Credible surveys report both the number of employees and the number of organisations behind each result.
The mean is calculated by adding all salaries and dividing the total by the number of observations. It can be distorted by a small number of exceptionally high or low salaries. The median is the middle salary after all observations have been arranged from the lowest to the highest. Since the median is less affected by extreme values, it often provides a better indication of the centre of the market.
The lower quartile is the point below which approximately twenty-five per cent of salaries fall. The median represents the fiftieth percentile, while the upper quartile represents the seventy-fifth percentile. These statistics describe the distribution of salaries and do not automatically recommend what an employer should pay. An upper-quartile salary may reflect a larger employer, a scarce-skills premium or a deliberately aggressive remuneration strategy.
The minimum and maximum are the lowest and highest reported salaries. They may reflect unusual circumstances, poor job matches, protected salaries or data errors. A survey maximum is not necessarily the maximum of a formal salary range, and a survey minimum is not necessarily an appropriate entry salary. Salary ranges should therefore be designed deliberately rather than copied from the lowest and highest observations.
Standard deviation measures how widely salaries are spread around the mean. A high standard deviation indicates substantial variation and may point to differences in job size, employer size, sector or remuneration strategy. The coefficient of variation expresses the standard deviation as a percentage of the mean, allowing variation across differently paid jobs to be compared. High variation should prompt further investigation before the result is used to set a salary midpoint.
The relevant labour market is not always limited to the organisation’s industry. Employers should compare themselves with organisations that recruit the same skills and to which their employees are likely to move. A mining company may compete with banks, telecommunications businesses and technology firms for accountants, data analysts and information technology specialists. Comparator selection should therefore consider talent flows, location, organisation size, ownership, revenue and operational complexity.
Selecting only the highest-paying employers creates an expensive and potentially unsustainable comparator group. The objective is not to find organisations that look identical or to justify a preferred salary increase. It is to identify the genuine market in which the organisation competes for talent. Comparator selection should be approved before the results are examined to reduce the risk of selecting employers that support a desired conclusion.
Balance competitiveness, affordability and sustainability
A competitive salary is not necessarily the highest salary in the market. It is one that enables the organisation to attract and retain the people required to execute its strategy without creating costs that the business cannot sustain. Affordability considers whether current revenue, cash flow, productivity and operating margins can support the proposed salaries. Sustainability considers whether the organisation can continue paying those salaries under less favourable economic conditions.
Paying substantially below the relevant market can cause turnover, recruitment difficulties and the loss of critical skills. Paying above the market without corresponding productivity or revenue growth can weaken the organisation financially. Every proposed adjustment should be modelled against total employment costs, including future increments, pension contributions, incentives and benefits. The correct market position is where talent requirements, business performance and financial capacity meet.
Job titles are unreliable because organisations use similar titles for jobs with different responsibilities. One Finance Manager may lead the entire finance function, while another may supervise a small transactional accounting team. Jobs should be matched using their purpose, responsibilities, reporting level, decision-making authority, financial accountability, workforce responsibility and organisational impact. A precise market statistic for the wrong job is worse than acknowledging that no reliable match exists.
Job evaluation grades can support market matching, but they should not replace an assessment of job content. Different organisations may apply the same job evaluation system inconsistently. Where the survey job is broader or narrower than the organisation’s job, the match should be treated cautiously. Weak job matching is one of the main reasons salary survey results produce misleading recommendations.
Compare the same remuneration elements
Basic salary, guaranteed remuneration, variable pay and total remuneration are different measures. Basic salary is the fixed cash amount, while guaranteed remuneration may include regular allowances and benefits. Total remuneration may include guaranteed pay, incentives and the assessed value of benefits. Comparing an employee’s basic salary with market total remuneration will falsely suggest that the employee is underpaid.
Paying at the market median does not mean every employee should receive the median salary. An organisation may position its salary structure at the median while employees occupy different positions within their salary ranges. Individual salaries should reflect competence, sustained performance, experience in the role, scarcity and progression through the range. The upper quartile should not automatically be treated as the correct salary for every high performer.
An organisation must choose its market position deliberately and apply it consistently. Critical or scarce roles may require a stronger market position than jobs for which labour is readily available. Such premiums should be approved, documented and reviewed rather than hidden within the salary structure. Market positioning must support the organisation’s talent strategy without undermining internal equity or financial sustainability.
A market statistic is a reference point, not a complete salary structure. A sound pay structure normally provides a minimum, midpoint and maximum for every grade. The midpoint may be aligned with the chosen market position, while the minimum and maximum allow progression as competence and contribution increase. An employee below the midpoint is not necessarily underpaid, and an employee above it is not automatically overpaid.
Inflation reduces purchasing power, but consumer price inflation and salary-market movement are not the same. Prices may rise faster than salaries because employers lack the capacity to provide full inflation protection. Salaries may also rise faster than inflation where particular skills are scarce. Applying the inflation rate automatically to every employee can therefore produce an unaffordable increase without correcting actual market gaps.
Currency changes complicate comparisons where salaries are paid in local currency, foreign currency or a combination of both. The survey should disclose the exchange rate, source and date used for conversion. A closing rate may be suitable for comparing current salary values, while an average rate may be more appropriate when analysing payments over a year. Using inconsistent exchange rates can create artificial market differences.
External competitiveness must be balanced with internal equity, which concerns the relative value of jobs within the organisation. Applying market data without reference to job evaluation can create unexplained differences between jobs of similar value. Some differences may be justified by scarcity, exceptional capability or temporary market pressure. These exceptions should be approved, documented and regularly reviewed because unexplained pay differences damage trust and create grievances.
A survey showing that market salaries increased by a particular percentage does not mean every employee should receive that increase. A structural adjustment changes salary ranges because the external market has moved, while an individual adjustment changes an employee’s salary for specific reasons. These reasons may include performance, promotion, pay compression, retention risk or progression through the range. Combining both decisions into one general percentage increase weakens pay governance and can reward poor performers while leaving serious inequities unresolved.
No salary survey should be interpreted in isolation. Organisations should also examine turnover, rejected offers, recruitment difficulties, time required to fill vacancies, exit interviews and the quality of applicants attracted. Resignations among employees paid below the market may indicate a salary problem, but they may also result from poor management, excessive workloads or limited career opportunities. The final decision must balance market evidence, internal equity, employee contribution, inflation, currency risk, affordability and sustainability.
l Nguwi is the managing consultant of Industrial Psychology Consultants.
