NBAA’s Compensation Survey provides a valuable starting place for the compensation decision-making process. By surveying flight departments of all sizes, across the country, with a variety of aircraft types, the survey results can give a reasonable approximation of the marketplace. NBAA offers the following guidance for using survey results for salary administration.
Identify compensation goals and objectives.
Specify what is to be accomplished through the company’s compensation system (e.g., retain high-performing employees, reward individuals who add significant value, support and encourage flight crew team performance), and then set objectives accordingly.
Assess desired compensation mix.
Determine the proportional relationship between base salary, short-term incentives and long-term incentives. The mix reflects how much “risk” the company is willing to build into the compensation package and how performance-oriented it chooses to be.
Determine competitive levels for each part of the compensation package.
Within the bounds of the company’s target marketplace, consider what competitive level (75th percentile, median, etc.) is relevant for each piece of the compensation picture. Depending on the company’s human resource requirements, financial condition and operating performance, it is possible to decide to focus on one level for base salary (e.g., median or market), another for short- and long-term incentives (e.g., 75th percentile) and yet another for benefits (e.g., average).
Compare and adjust job descriptions.
A rule of thumb is that if 80% of more of a job’s scope and activities are the same as the survey position description, it is a good match. If the job is smaller than the survey position, consider adjusting the survey data downward, generally between 5% and 15%. If the job is larger than the survey position, consider adjusting the survey data upward by 5% to 15%. If an adjustment of 20% or more seems necessary, the job is probably not a correct match for the survey position. Review the survey’s job descriptions.
Age data to account for market adjustment.
The steps for aging data to a common point in time are as follows: (1) divide the number of months that have passed since the survey’s effective date (January 1, 2015) by 12, and (2) multiply the results by the assumed market movement. For example, aging six-month-old data, assuming a 5% annual salary growth, would require increasing the published salary rates by 2.5%.
6/12 = 50%
50% x 5% (assumed annual salary growth) = 2.5%
Average Salary Rate x 1.025 = Aged Salary Rate
Select target market criteria (industry group, department size, type of aircraft flown, etc).
Select one or several criteria, depending on what is most important to the company in determining pay levels.
When choosing multiple criteria, weight according to the importance of each criterion. Weights may be assigned in any proportion as long as the total weights equal 100 percent.
Determine pay level to be used.
The level selected should be consistent with the company’s compensation philosophy and target marketplace. If you want to pay at or near market levels, consider choosing the median. To pay above market levels, target the 75th percentile. A common strategy in performance-driven organizations is to target base salary at or slightly below the median, but choose the 75th percentile for targeting total compensation (base plus bonus).