How to Determine an Employee's "Market Value"
What Is “Market Value”?
Simply put, market value is how much the market at large values something.
For example: consider the market value of a vintage sapphire ring. The factors to note are the quality and cut of the gemstone, the craftsmanship of the ring’s setting, the style, the condition due to its age, and more. Let’s say that the jeweler who cut the gemstone and crafted the setting is a famous, well-regarded expert, and many people seek to own one of their few creations.
The market value of a ring like that would be extremely high. It’s hard to find and buy because the jeweler made very few pieces, sapphires are high in value compared to other gemstones, and vintage pieces often accrue higher value over time. If you wanted to purchase this ring, you would submit a competitive offer due to what you know about the ring’s value and scarcity.
Hiring and retaining talent are very similar concepts.
What Does It Mean for an Employee to Have “Market Value”?
For an employer, market value applies to your employees within the context of how much compensation they are worth due to their skills, experience, education, and other determining factors.
Employees are a resource, and many HR professionals know they are a company's most important resource. So when someone refers to “market value” within the context of hiring and retaining employees, think of it as a way to describe deciding factors when budgeting for these key items:
- How much will it cost to recruit for this role?
- How much will it cost to retain the ideal person for this role?
- How much will it cost if the role is empty for an extended period of time?
As a small to midsized employer, you may have a very tight budget—and a very intentionally curated workforce. So, each person’s market value is incredibly important, so you can keep your hard-won talent and avoid the “what ifs” of losing them to other organizations (or competitors!).
How to Determine an Employee’s Market Value
Figuring out an employee’s market value lies within the responsibilities of both HR and managers. An HR Party of One is likely involved in compensation strategy—and if not, you may want to ask financial leaders in your organization more about it to get up to speed. Managers will know more about the role itself and what skills, education, experience, etc. are needed to succeed. You’re the one most equipped to use that knowledge actionably to improve recruitment, retention, and, ultimately, your organization’s bottom line.
The key to determining market value is to conduct market research on your targeted role. “Market research” is a very broad category, but here’s a specific step-by-step plan to keep you focused on the goal without adding too much to your plate:
1. Consider the role, or individual, for whom you are deciding compensation. Identify the differentiators, like:
- Years of experience
- Necessary skills
- Education or certifications
- Level of role
- Travel requirements
- Other factors
This will help you narrow your search for similarly compensated roles. And this is when the manager should step in and help you flesh out the particularities of the role. The manager will know the most about what sort of hire is best and may have insight into how difficult it is to find people with a certain skillset.
Think of an HR person tasked with determining the market value for an experienced underwater welder needed to lead a project. That is a very dangerous role requiring experience in welding and scuba diving, and will likely have travel requirements associated with completing their work, and necessary leadership experience.
A team leader in a similar role will know how difficult it is to hire for that position. So, they can aid you in determining the most important factors for recruiting the ideal employee with consideration to the HR’s recruitment budget. Balancing the budget against remaining competitive with recruitment is well within the scope of an HR professional, but others will have information and a stake in helping you find the best person for a job.
2. Collect a set of resources to begin your research. There are many job sites, recruiting firms, personal references, and more to sift through to gather accurate and informative data. Here are some options to start you off:
- Indeed.com: this website hosts thousands of open roles you can review to compare data.
- Salary.com: this website has free and more intensive paid options to help you dive right into market research results professionals collect.
- Payscale.com: this is another option with free and paid subscription models that provides salary reporting for thousands of unique positions.
- Recruiting firms: developing a good relationship with a recruiting firm can give you access to a wealth of information about compensation trends.
Google: a simple Google search may turn up thousands of results, but be wary of what’s viable to include in your research and what’s not.
There are many options out there to help you get started, but not all of them will be what you need. So, the next step is to tailor your resources to your target market.
3. Identify the places where similar roles are advertised. It isn’t feasible for you to review hundreds of online job-hunting platforms, not to mention other resources, within your limited time. You can narrow your focus to the places most likely to host similar postings.
For example, if you’re doing market research for a senior-level software developer, you will have more luck finding similar roles on sites like LinkedIn or Indeed, as many people within the software industry seek out new roles on those websites. Other popular sites for developers include Stack Overflow and Lara Jobs for specialized roles.
If you specifically need an entry-level position, many universities have dedicated platforms to match graduating students to their future careers. Handshake is a great platform to find young professionals keen to break into the industry.
4. Compare the similar roles to your current data. The results will pull up different companies, and you can take notes on their compensation about wages and benefits to compare to your own data. If you use an HRIS like BerniePortal, the payroll feature will enable you to download reports on your compensation practices and data so you can effectively job-cost.
Remain careful when using market research to help you recruit and retain the best talent. Antri-trust laws apply to HR pros, too, and curtail how and when you can use data reports to inform your hiring practices.
You can stay informed, educated, and up to date with important HR topics using BerniePortal’s comprehensive resources:
- BernieU—free online HR courses, approved for SHRM and HRCI recertification credit
- BerniePortal Blog—a one-stop shop for HR industry news
- HR Glossary—featuring the most common HR terms, acronyms, and compliance
- Resource Library—essential guides covering a comprehensive list of HR topics
- HR Party of One—our popular YouTube series and podcast, covering emerging HR trends and enduring HR topics
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