If you’ve worked in compensation a while you probably know all there is to know about “aging” data. If you’re new to comp, however, and aging data is a bit of a mystery, read on for practical tips from BLR’s Senior Compensation Editor Sharon McKnight, CCP, SPHR.
 |
WorldatWork defines “aging data” as, “The practice of increasing market survey data by a percentage assumed to be representative of wage movement to bring the data to a consistent point in time.”
What Does It Mean?
In a nutshell, it means that if you’re using salary data from multiple salary surveys but are not aging the data from each to a common date, you’re comparing apples to oranges.
Compensation.BLR.com, now thoroughly revved with easier navigation and more complete compensation information, will tell you what’s being paid right in your state–or even metropolitan area–for hundreds of jobs. Try it at no cost and get a complimentary special report. Read More.
Let’s say you have data for a department manager position from two different surveys. Survey A is dated January 1, Survey B is dated June 1, and right now it’s October 1 of the same year. You need to “age” the data from both surveys to the same point in time in order obtain a composite rate for your accounting position.
Here’s how it works.
Survey A = $52,000 effective January 1
January 1 to October 1 = 9 months
Annual Aging Factor* = 3%
9/12 x 3% = .025 Aging Factor
$52,000 x 1.0225 = $53,170
Survey B = $53,000 effective June 2
June 1 to October 1 = 4 months
Annual Aging Factor* = 3%
4/12 x 3% = .01 Aging Factor
$53,000 x 1.01 = $53,530
Composite: $53,170 + $53,530 = $106,700 ÷ 2 = $53,350
Try BLR’s all-in-one compensation website, Compensation.BLR.com®, and get a complimentary special report, Top 100 FLSA Overtime Q&As, no matter what you decide. Find out more.
What If Your Salary Data Are More Than One Year Old?
You should probably be looking for a new data source, but if that’s just not possible, you can age the data for more than 12 months. For example, from January 1 to July 1 of the following year. You’ll need to break it down into two calculations: one for the first 12 months and then a second calculation for the last 5 months.
Here’s how it works.
First age the data 12 months
$52,000 effective January 1
January 1 to December 31 = 12 months
Annual Aging Factor* = 3%
12/12 x 3% = .03 Aging Factor
$52,000 x 1.03 = $53,560
Next age the data for the remaining 6 months
$53,560 effective January 1
January 1 to July 1 = 6 months
Annual Aging Factor* = 3%
6/12 x 3% = .015 Aging Factor
$53,560 x 1.015 = $54,363
Making sure that the data from multiple surveys are aged to a common date is an essential step in the market pricing process. One thing to remember, though, is that if you age older data to a current date, you’re lagging the market. If you want to lead the market, you need to start with more current salary data and “age” it forward using the formulas shown above.
*The Annual Aging Factor is subjective and determined by the user. It could be an internal amount, such as your budgeted increase percent, or it could be an external amount, such as the annual CPI.
Tomorrow, McKnight’s take on your market position, plus an introduction to the all-things compensation-in-one-place website, Compensation.BLR.com®.
Source links: http://compensation.blr.com/Compensation-news/Compensation/Compensation-Administration/Aging-Salary-Data/