Archive for February 18, 2014

How is a Salary is Determined?

Posted: February 18, 2014 in Career

Years ago I found myself in a very sticky situation. The worst part; I understood why, but I still didn’t think it was right.

I was managing a small DBA group that had a total of 6 headcount. I was fortunate that I didn’t have a lot of turnover and honestly I was surprised because the company provided a less then optimal working environment. I had a position come open and I started the process of hiring a new DBA. After a number of interviews it was obvious there were a large number of candidates looking for work at that time. The person that I ended up extending an offer to, and employed was someone who in my mind is an ideal candidate, we will call him Bob. He didn’t disappoint at all.

A year later I was in the same situation, however when I started the interview process this time I determined there were very few candidates that I could draw from. I ended up finding someone who at the time I thought would be a good fit for the team we will call him John. I made the offer and John accepted. In the long run I don’t think the position was a good match for John but that is a different story for a different time. Now this is where things get a little crazy. Bob was hired at one rate let’s say $20.00 an hour, and John was hired at $25.00 an hour. Both of them were going for the same job description and received the same benefits yet the Salary was quite different.

The company I was working for didn’t let me determine the salary of an employee. The way it was determined was that I given a range of what I could afford in my department budget and I was often instructed to try to stay in the middle of that range. When I hired Bob the range was $15.00 to $22.00, yet when I hired John the range was $25.00 to $30.00 an hour. Here is where the questions started, and today many years later I have had the opportunity to discuss this in an interview format with different HR directors, the information posted here comes from 3 different interviews. None of the individuals wanted to be identified however I can tell you that:

  • One is from the government agency with near 200 employees
  • One is from a non-profit with near 500 employees
  • One is from a for profit company with well over 5000 employees

What surprised me the most is that no matter how different the hiring organizations are the answers are really not different in how they determine what salaries are offered to potential employees. I wanted to focus on three questions in particular; I have listed them here with a summary on how they were answered:

  1. How do companies determine a salary range when they are trying to fill open head count?

    The general answer here is a company makes a determination if they are going to pay at market rates often a decision is made to pay slightly higher or slightly lower than market. Once that decision is made they research the market and then determine the spread, the average is determined and then adjustments are made. When researching for the market variables such as cost of living allowances are taken into consideration (It costs more to live in Southern California then it does in Colorado). For example in Feb of 2014 a salary range for Colorado Springs, Colorado is shown below.

    The Median or average is $95k a year (National average was $107k) for a Data Architect 3 or a senior level data architect as explained in the description. Companies then make adjustments based on if they want to pay slightly above or below this average, as you can see 50% of the salaries fall between $83k and $107k. This chart was supplied by Other sources used to determine Salaries include:

  • PayScale
  • Career

End result, I was not too surprised at what the decision makers were telling me. Granted I did find the 50% range from $83k to $107k a lot wider than I had anticipated.

  1. How does a non-profit organization such as a government organization or a religious organization determine a salary range?

    Now here is where I was surprised. To be honest I am not sure that my research had enough input points to be considered a set of valuable statistics. The answers I received pointed to using the same methodology as for-profit organizations. My experience when looking at these non-profits does not reflect that. My own opinion derived from discussions with people who are employed at non-profits or interviews with non-profits is they generally pay about 70% to 80% of average. Reflecting back to one specific discussion on salary while I was being interviewed for a position, a local religious non-profit explained the away the delta by discussing the benefits in the nature of the work itself (much could be debated on this).

  2. How much does a job title impact the salary range?

    One note about the question with titles, and this one may just be me and my experience. I have always argued that a title should reflect your job description accurately. At one point in my career I was told titles mean nothing, and my title would not be adjusted. I have found this is often a problem for a number of reasons. Many companies have a max salary for a job title, for example if you had a title of a Jr. DBA your ceiling or salary cap would be lower if you were a mid-level DBA. From a general view that makes a bit of since, if you were a Jr DBA before you can move to the next salary bracket you should display the skills of a more seasoned professional. This argument doesn’t hold much water in many situations. When I asked the questions to the panel the answer I received was very clear and uniformed. Title does matter, not only does that title matter but the tasks associated with it matter.

Remember Bob and John? In my situation Bob the employee that was making less money than the new hire found out that John was making more money than he was. I have to admit that was one of the hardest days at that role in the company. I had to have a discussion with Bob and explain the market had changed and that the amount of money other people were making was no reflection on him. As much as I understand why the fact remained that if I was Bob, and found out that someone who was just hired was making more than what I was all depending on the market when I was hired I would be a little sore as well.

I tried to do the right thing and bring Bob up to the level that John was making, even a little more. The end result was the damage was done.