What is your approach to aging ?

What is your approach to aging

… I’m referring to aging salary survey data, of course 🙂

The big compensation providers are starting to return the results of their 2011 surveys, and now is the time to get started on the analysis of the data.

So, a few months ago, you participated to the survey. The data you submitted was dated January 1st, 2011 or April 1st, 2011, for example, as requested by the provider. We’re now at year-end and you want to use the data. So you use the survey results and the published information on salary increases in 2011 and prorate the increases to project your data to January 1st, 2012. Let’s imagine a basic pay of AED 10,000 as of April 1st, 2011 and survey data showing increases of 10% for 2011 and projected at 8% for 2012. Your data at December 31st, 2011 will be 10,000+ (10,000 * 10% * 9/12)= 10,750.

Great ! But what now ? What is your company’s approach to salaries ? Which numbers will you use to compare to your current salary range midpoints, set hiring salaries by grade and/or job family in your company, determine your salary increases budget ?

Do you want to keep projected salaries with an effective date of January 1st ? (In our example, salary to be used is 10,750 as calculated above). In that case you have a lag philosophy, meaning that you know that for the whole year of 2012, your projected salaries will actually be lower than market (because salaries will raise by 8% in 2012). So throughout the year, you’ll be making “savings” on employee costs – but you will also probably experience attrition and will have to manage lots of employee engagement issues as well as individual cases that you will have to take care of because the managers won’t want to lose their best employees and will ask you to do “exceptional salary increases” for the people at risk of leaving. You may also encounter issues for attracting new hires, especially in the second half of the year, as you will be paying less than market rate.

Or do you want to project salaries to end December 2012, in which case you have a lead philosophy ? (In our example, salary to be used is 10,750*1.08 = 11,610). This one is great for attracting talent as you are effectively paying slightly above market, especially in the first half of the year. But it is also more expensive as you have to bear the full cost of the anticipated wages throughout the whole year, so you need to figure out what your company can afford, and what other companies in your industry are doing.

Or do you want to have a lead/lag philosophy, where you lead market for some time then lag slightly behind market for the rest of year ? For example, if your company reviews salary increases in April, you may want to age you survey data to April 1st, 2012 so that you lead in the first 3 months of the year, then lag for the rest of the year (10,750+ 10,750*(8%*9/12) = 11,395). Or you could decide to split in halves and age your data to July 1st, 2012 as a reference for your compensation activities, meaning you’ll be slightly above market for one half of the year, and slightly behind for the second half (10,750*(1+0.08/2) = 11,180). A lead/lag philosophy offers a balanced approach to cost, attraction and retention which can be tailored to the actual rhythm of your business, or simply based on when you anticipate recruiting the most people, or simply a 50/50 approach to smooth out the costs.

All in all, what I’m saying is simple : don’t just take the survey information and use it as is. Mould it into what suits your organization best, and remember that surveys only give you a snapshot of the past. By the time you get the results, the data needs to be manipulated to become more relevant to your actual situation and need at a specific date. Whether you lag, lead, or lead/lag is entirely up to your company. But you need to make a decision about what is best suited to your needs, and then use the data for making decisions or recommendations to your management. Which CEO or CFO could resist seeing anticipated costs and their impact on the business, with the associated risks and benefits ? And who knew that such a simple mathematical trick could make you look so business-focused in the eyes of the top guys ?

Print Friendly, PDF & Email


  1. Straight to point and very informative – thanks Sandrine

  2. M Moazzam Khan says

    Sandrine, Appreciate your committment to the Comp. & Ben. field. Your simple articles can make a Comp and Ben. manager out of a simple person. Keep up the good work…….

    • Moazzam, thanks ! I try to make it interesting for the HR Generalist while keeping it still useful for the Compensation professional. Hopefully I will be able to strike the right balance between the two…. 🙂

  3. Abelardo José Sulbaran says

    Hello Sandrine:
    I want to share with you my experience, but it is not the most common, would be interesting.
    My company operates in Venezuela, the country whit highest inflation rate in the world. In 2016 the annual inflation rate was over 250%, and this year, in only one month the inflation rate reached 33%.
    As you can see, in very hard to me manage the aging of salary survey data, because it happen day by day.
    To face off this situación, all the survey’s participant companies need to keep in contact with survey provider every month to share with them ours salary increases and then they send back us a monthly report of market trends. So, any company evaluates the information taking into account their budget and cash flow to decide the salary increase that they can afford to keep pace with inflation and hold the employee’s purchaising power.
    This years have been the hardest for compensation&benefits professionals in my country.


Speak Your Mind