Comp Challenge: Pricing the Same Job in Different Cities

Stacey Carroll, SPHR, CCP

Director of Professional Services & Education

PayScale, Inc.

7,000 Positions. 50 Major Industries. 11 Countries.

PayScale is a market leader in global online compensation data. With the world's largest database of individual employee compensation profiles, PayScale provides an immediate and precise snapshot of the job market.

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Agenda

Why this challenge exists

What the data suggests

What to do with this challenge

Communicating differences to employees

Q&A

Why the challenge exists

People (employees and managers) confuse cost of living with local wages

Different locations = Different managers

Factors other than geography may be at play

Lack of data, philosophy or structure

Data doesn’t always account for the “commuter”

What the data suggests

1. All positions are not created equal

2. Differences are most dramatic in the middle

3. The $75k rule

4. The supply and demand of qualified workers is more important than geography

5. Some differences can’t be explained objectively

Not all positions are created the same

Position Title Organization Annu. Base Mkt - 10th

Annu. Base Mkt - 25th

Annu. Base Mkt - 50th

Annu. Base Mkt - 75th

Annu. Base Mkt - 90th Delta

Account Executive Seattle $31,816 $38,344 $46,309 $55,401 $64,911

Account Executive Washington DC $33,714 $40,713 $49,406 $59,503 $70,259 107%

Account Executive San Francisco $36,255 $43,888 $53,289 $64,115 $75,535 115%

Account Executive New York $33,446 $40,848 $50,106 $60,999 $72,830 108%

Account Executive Houston $31,177 $38,031 $46,586 $56,605 $67,394 101%

Account Executive Honolulu $30,587 $37,295 $45,658 $55,410 $65,826 99%

Accountant Seattle $44,035 $49,551 $55,552 $62,554 $71,317

Accountant Washington DC $46,886 $52,743 $59,638 $68,019 $78,551 107%

Accountant San Francisco $52,633 $59,665 $67,628 $76,969 $88,353 122%

Accountant New York $46,228 $52,899 $60,316 $68,835 $78,990 109%

Accountant Houston $39,293 $44,607 $50,476 $57,556 $66,818 91%

Accountant Honolulu $36,928 $42,187 $48,599 $57,168 $69,381 87%

Customer Service Representative Seattle $24,096 $27,382 $31,660 $36,904 $42,964

Customer Service Representative Washington DC $21,862 $25,180 $29,627 $35,267 $42,047 94%

Customer Service Representative San Francisco $25,140 $28,940 $33,965 $40,215 $47,514 107%

Customer Service Representative New York $23,198 $26,934 $31,962 $38,406 $46,296 101%

Customer Service Representative Houston $20,717 $23,924 $28,217 $33,681 $40,315 89%

Customer Service Representative Honolulu $21,227 $24,563 $29,038 $34,699 $41,455 92%

RN Seattle $52,931 $59,573 $66,288 $74,513 $86,021

RN Washington DC $49,182 $55,097 $61,941 $70,955 $83,741 93%

RN San Francisco $59,643 $67,422 $76,143 $87,134 $102,243 115%

RN New York $52,916 $60,980 $69,579 $80,013 $94,215 105%

RN Houston $50,048 $57,186 $64,398 $73,308 $86,004 97%

RN Honolulu $48,540 $55,157 $62,722 $72,541 $86,425 95%

Software Engineer Seattle $66,406 $77,627 $89,142 $100,733 $112,178

Software Engineer Washington DC $62,197 $72,305 $83,502 $95,539 $107,949 94%

Software Engineer San Francisco $72,465 $84,924 $98,395 $112,559 $126,893 110%

Software Engineer New York $65,672 $77,951 $91,290 $105,337 $119,527 102%

Software Engineer Houston $52,779 $62,152 $72,205 $82,822 $93,816 81%

Software Engineer Honolulu $55,852 $66,799 $78,788 $91,724 $105,420 88%

Metropolitan Areas Median Pay for a Software Engineer with 0-5 Years of Experience

Cost of Living Index (National = 100)

Louisville, Kentucky / Indiana Metropolitan Area $51,900 87.6

Houston-Baytown-Sugar Land, Texas Metropolitan Area $60,300 91.9

Detroit-Livonia-Dearborn, Michigan Metropolitan Area $54,900 98.2

Phoenix-Mesa-Scottsdale, Arizona Metropolitan Area $58,500 99.6

Salt Lake City, Utah Metropolitan Area $63,500 100.6

Seattle-Bellevue-Everett, Washington Metropolitan Area $73,800 120.2

San Jose-Sunnyvale-Santa Clara, California Metropolitan Area $85,800 143.5

New York-Wayne-White Plains, New York / New Jersey Metropolitan Area $75,300 177.7

Geographic Offset Does Not Equal Market Wages

Notes: 1. The Median Pay reported is the Median Total Cash Compensation for Software Engineers with 5 or less years of experience (median of 2.5). 2. The metropolitan areas are defined by the Office of Management and Budget 3. The Cost of Living (COL) Index is provided by The Council for Community and Economic Research. It is important to note the index reflects cost differentials for professionals and executive households in the top income quintile. 4. The higher paying metros are typically the ones with the higher cost of living. 5. Two Cities stand out as having pay higher than their relative COL: (a) Houston's predominant industry being Oil & Gas Exploration, which is a high paying industry. (b) San Jose is the key city in Silicon Valley, which is a top site for large, high paying tech companies (e.g. Google, Facebook, Cisco, Intel, etc.)

What to do with the challenge

Make sure jobs are well defined and scoped Important scoping factors include: Budget managed, Branch/location size,

number and level of employees managed, strategic skills and “reports to”.

Make sure you have reliable geographic data

Develop a strategy relative to market based wages

Blog Post: How to pay virtual workers Whitepaper: How to manage pay for virtual workers

Build guidelines and or train managers how to use salary ranges.

Teach managers how to negotiate with prospective employees

Webinar: Salary Showdown – Tuesday, October 18, 2011

Communicating Differences with Employees

Educate employees about your salary program

Share important information with employees about the market

Empower employees who are ready to make changes

PayScale Delivers Where Other Compensation Providers Fall Short

PayScale operates the largest online salary database in the world. We allow organizations to price their jobs according to their industry, location, and the employee skill sets which make their workforce unique. PayScale goes beyond supplying the accurate data you need - we also give you the tools to efficiently manage your compensation projects, and the knowledge to stay up-to-date.

Visit our blog: http://blogs.payscale.com/compensation/

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Stacey Carroll, M.B.A, SPHR, CCP Director of Professional Services & Education PayScale, Inc. Connect with me on LinkedIN: http://www.linkedin.com/in/hrstacey