Compensation includes base pay (regular pay/salary), variable pay (commission/bonus) and other compensation such as stock options, company vehicles, etc.  The best way to determine if pay practices are competitive is through surveys.   

The most cost-effective way to survey is to call competitors and other businesses in the area, to find out how they compensate employees in similar positions.  This is the least scientific, and success depends on the other companies’ willingness to share information.  Competitors’ willingness to share information may be improved by using a third party to collect and summarize the survey results, without identifying individual businesses.

Large consulting firms like Mercer, AON Willis Towers-Watson, and Hay, conduct annual compensation surveys, as do some industry associations, or you may wish to work with a local consultant who can help you develop your own survey, distribute the surveys and collect and analyse the results.

In some cases, participation in the survey may be a requirement to obtain the results: in others, non-participants may pay a higher fee to purchase the results.

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