Salary Ranges

Rockie

Does anyone have a quick and simple explanation of what it means for a salary to be in a certain percentile? In looking at some ranges for a Business Office Manager, the 25th percentile is $41,222 and the 75th percentile is $58,247 and the 90th is $67,542. How do you decide where an incumbent should fall in the range?

Thanks

davids

I think where you want to be within the market range depends on your organization's compensation philosophy. Do you want to lead market (i.e., be above 100%)? Do you want to hire a bit below market and then bring people up to market within 2, 3, 5 years?

I have spent most of my career with public employers, so we never want to lead market. With my current employer, our compensation policy is to be with 5% of market. This means if a job is within 95% - 105% of market we are okay. If a job is outside that range, we will look to adjust the salary.

The other important consideration is to look at your total compensation package including benefits, retirement contributions, leave, etc. We pay salary below market, but make up some of the difference with a very attractive benefits package (fully paid health insurance for employee and family, generous contribution to retirement, etc.). So when I say we are within 5% of market, that is looking at total compensation.

joannie

25th percentile would mean of the respondent companies 75% paid more than $41,222 and 25% paid less than $41,222. Unless you are looking at an industry specific survey, you might want to be careful using these ranges to set your compensation policy. The higher percentile respondents may well be high profitability margin companies or in a really tight labor market.