|
FOR IMMEDIATE RELEASE
 Salary
Survey Guidelines - Why Direct Data Exchanges Should Be Avoided
G. Jonathan Meng, General Partner
September 2005
According to a World at Work survey, more
than 50% of organizations have no guidelines regarding the participation in, or
use of, salary surveys. Virtually all organizations participate in
third-party surveys (those conducted by consulting firms, etc.) while more than
60% also participate in non-third party surveys (i.e. those conducted by a
survey participant, not a consulting firm or trade association). While
only 10% never heard of the Safe Harbor Guidelines, only 16% are "very
familiar" with them. With request for survey participation constantly
passing over the desks of HR professionals, how should salary information be
exchanged?
Concern regarding salary surveys first arose in
the 1990's when hospitals in the Salt Lake City region of Utah were accused of
colluding on the compensation paid to healthcare employees through the exchange
of salary information--a violation of the antitrust laws. As a result, the
Department of Justice and Federal Trade Commission issued a set of guidelines
that would provide a "safe harbor" from antitrust challenges. Although the
Safe Harbor Guidelines were promulgated for healthcare, they have been
adopted by many companies in other industries
- Salary surveys need to meet the following
criteria:
- The survey must be managed by a third-party
(i.e. consulting firm);
- The information provided by participants is
based on data more than three months old;
- There have to be at least five providers
offering data and no individual provider's data should represent more than
25% on a weighted basis of that statistic; and lastly,
- Any information disseminated must be
sufficiently aggregated so participants are not able to identify the
compensation paid by any particular provider.
Any exchange of information outside the above
needs to be examined on a case-by-case basis to determine if there may be an
anticompetitive effect. Exchanges of future compensation information is
likely to be considered anticompetitive.
Since the Safe Harbor Guidelines, the
federal court of appeals in New York (Todd vs. Exxon, 275 F2d 191 (2nd
Cir. 2001) raised additional concerns regarding compensation benchmarking.
In Todd, fourteen competitors in the oil and petrochemical industry
(representing 80-90% of the industry) exchanged detailed compensation
information relating to managerial, professional and technical employees.
Each company could receive subsets of the data from as few as three companies.
In addition, the participants met at least three times a year to discuss current
and future salary budgets. The court concluded that the data exchange as
presented aroused suspicion of anticompetitive activity.
In light of Todd, the guidelines set forth
below should be followed:
- Do not limit the survey to those employers
having a specialized set of skills in only one industry;
- The survey group should be of a sufficient
size so that position-specific compensation paid by others cannot be
determined;
- The survey should not contain a
recommendation;
- Do not exchange future compensation
information;
- Avoid frequent exchanges of information;
- Report only aggregated data;
- Use a third party to aggregate and analyze
competitive data.
In conclusion, it is recommended that the Safe
Harbor Guidelines as well as the Todd rationale be followed and
direct data exchanges should be avoided. At the very least, a conscious
effort must be made to balance the need for information about compensation and
the potential risks of running afoul of antitrust.
For More Information Contact:
WMS and Company, Inc.
20128 Valley Forge Circle, King of Prussia, PA 19406
Tel: PA: 610-783-7733 CO: 720-890-1528
FAX: PA: 610-783-6591 CO: 720-890-1529
Internet:
info@wms-wms.com
| 
