Compensation: The Factors That Decide Your Salary

When it comes to compensation, your worth is what employers are willing to pay you and what you are willing to accept. However, that doesn’t mean everybody’s tossing around random numbers. Every job has a pay scale and it’s not pulled out of thin air.

Compensation is all about data, and that data is available in some form to anyone ambitious enough to seek it out. Many companies invest considerable resources, time, and effort to develop compensation strategies based on the best available data to ensure they remain competitive in the labor market. Job seekers who want to make an informed decision about job offers and professionals who wish to gauge their current compensation against market norms should do the same.

A great example is Payscale.com, an employer compensation data service and software tool that has free resources for individuals as well, including salary research, job listings, and a cost-of-living calculator. A quick tour of their website will give you a good idea of the kinds of data sets employers seek to determine pay scales and this article is the perfect prelude to a deep dive on Payscale.com’s “For Individuals” section.

When you apply for a job, a job’s pay range has been pre-determined. However, knowing the ins and outs of compensation will strengthen your negotiating posture in case there’s wiggle room. Here are the factors that impact compensation:

• Compensation philosophy. A company’s compensation philosophy guides its staffing decisions and may categorize roles based on whether it wants to pay above, at median, or below market rates. There may be a little wiggle room, but whether that benefits the employer or the employee is a see-saw.

• Supply and demand for your skill set. No other factor has more of an impact on your immediate circumstances. Regardless of your skill set or magnetic personality, external factors mostly beyond your control (e.g., COVID, The Great Recession) mean supply and demand fluctuate unpredictably. One moment, you’re in demand, the next you’re obsolete. One year, it’s a hot job market, the next year the leverage swings to the employers.

• Geography. This is a driving factor for pay scales and recruitment. First, if you work in a city your cost of living is more than if you work in a small town. If you live in a state with an individual tax burden of 15.9% (New York, 2022) vs. 4.6% (Alaska, 2022), and the housing costs a heck of a lot more, your cost of living is higher. It should be no surprise that a job in New York City “pays more” than the same job in Anchorage. And speaking of work-life balance decisions and reducing staffing overhead, employers and employees alike are motivated to keep remote work a permanent feature of contemporary work arrangements. As such, pay scales adapt accordingly. A job performed remotely will most likely have a different pay range than one where the same job is performed on-site.

• Urgency. If an employer needs a job filled quickly, an initial offer is more likely to be at the top of the range with flexibility to sweeten the deal if necessary. If you need a job yesterday to pay your bills, you’re more likely to accept an offer at the bottom of the range and be more averse to negotiating for more.

• Relocation. If a company is looking for professionals with specialized skills, the pay scale may reflect recruiting and relocating top talent. The compensation package may include additional enticements (e.g., signing bonus) and benefits (to

• Equity. Equity means that you should be paid the same as your peers with the same amount of experience. As you can imagine, this is a data point that is advantageous to know.

• Length of commitment. A short-term job may or may not pay more than a long-term job. In contrast, a “temporary” job may pay far less than the same job as a full-time employee, though many people work their way into full employment from temp jobs. In that example, the same person is subject to two different pay scales for the same job.

• Yes, you get points for your magnetic personality. It may not stop a plague or housing crisis, but your professionalism, class, and style never go unnoticed. If people just plain like you, that may affect your pay scale for the better. This is where your dazzling negotiating skills come in. Everything is negotiable. The worst that can happen is they say “no,” and you move on to the next deal point.

Those are just a few of the data sets that may be weighted when determining a job’s pay scale and where an applicant should fall on that scale. Yet, to illustrate the point that supply and demand is a wild bronco, an interesting example is the Common Business Oriented Language (COBOL). COBOL is an almost extinct computer language used only to maintain existing applications since 2006.

Those applications are still used by large institutions like the government, universities, and large corporations. Meanwhile, the most experienced COBOL programmers have retired and there aren’t any more rising to take their place. The supply of competent COBOL technicians who can keep existing applications going and resolve legacy maintenance issues is very low and, in certain sectors, the demand for them is very high. It pays to know COBOL, much more now than it did before!

Philip Roufail contributed to this article.

Scott Singer is the President and Founder of Insider Career Strategies Resume Writing & Career Coaching, a firm dedicated to guiding job seekers and companies through the job search and hiring process. Insider Career Strategies provides resume writing, LinkedIn profile development, career coaching services, and outplacement services. You can email Scott Singer at scott.singer@insidercs.com, or via the website, www.insidercs.com.