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Making a compensation decision is more than looking at salary data and selecting a number. While market data helps guide pay practices, true compensation decision-making requires context, internal equity considerations, and performance alignment. Simply copying benchmark numbers leads to disengagement, budget imbalance, and fairness issues. If your team sees compensation as a data-driven task only, it’s time to rethink the process.
Why Compensation Isn’t a Copy-Paste Exercise
Compensation decision-making is not simply about comparing numbers. Although market data provides useful insight, relying on it as a final answer can cause more harm than good. For instance, internal equity, employee contributions, and budget realities may all point to a different figure than the market average.
Consider this common scenario: A manager sees a benchmark saying a software engineer’s pay is $135,000. Without further thought, they recommend that figure for a new hire. Yet, their internal engineers with more experience are earning $125,000. As a result, the new hire enters above peers—causing friction, turnover risk, and budget tension.
Therefore, it’s essential to recognize that market data serves as guidance—not instruction. Ultimately, compensation professionals must weigh that guidance against what makes sense internally.
Remember: Market data is your compass, not your GPS. It shows direction, but it doesn’t map your exact route.
How to Make a Real Compensation Decision
Rather than jumping to conclusions based on data alone, consider this four-step process:
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Clarify internal goals
First, understand how the role supports current and future business needs. What is its true impact?
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Use data as a range, not a rule
Market data shows a range of values, not a mandate. Decide whether someone should be paid low, mid, or high in that range based on their contribution and trajectory.
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Assess internal consistency
Next, compare similar roles. Who’s already in the same job family? What’s their tenure and performance level? Avoid internal misalignment.
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Document your rationale
Lastly, write it down. Compensation decisions are often questioned by leadership, auditors, or employees themselves. A brief explanation keeps the process transparent and defensible.
As you can see, each of these steps involves critical thinking—not copying and pasting.
Where Salary Algorithms Fall Short
Today, it’s easy to turn to salary calculators or AI tools. Many managers do just that. Still, these tools often miss key nuances.
For example:
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Some data sources are crowdsourced, making them unreliable.
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Job titles may not match across organizations.
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Regional or remote work factors are rarely adjusted accurately.
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Worse, these tools don’t account for your business’s internal compensation philosophy or strategy.
At MorganHR, we’ve seen companies both underpay and overpay roles because they leaned too heavily on algorithmic outputs. Consequently, they had to adjust later—often at a much higher cost.
A Better Stat: Manager Confidence Still Lags
While salary data is plentiful, decision-making confidence isn’t. A 2023 SHRM survey found that only 36% of organizations believe their managers are trained and confident enough to make pay decisions independently.
Source: SHRM, “How Organizations Are Managing Pay Equity”
Clearly, this points to a widespread need for HR-led education and decision frameworks—not more data.
Elevating the Manager’s Role in Pay Decisions
Managers are uniquely positioned to understand individual contributions. However, they often lack the tools or confidence to apply compensation strategies consistently.
This is where SimplyMerit bridges the gap. It provides visibility into salary ranges, budgets, and performance history—while enabling HR oversight. In this way, it creates a shared framework for decision-making.
More importantly, it empowers managers to:
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Understand the why behind the range
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Stay within budget limits
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Support pay equity across teams
Thus, the role of HR shifts from gatekeeper to guide.
Key Takeaways
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Compensation decision-making is a strategic act that blends data with context and judgment.
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Salary benchmarks are tools, not rules—they inform, but should not dictate.
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Managers need training, support, and flexible systems like SimplyMerit to make consistent and equitable decisions.
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HR should focus on alignment, transparency, and documentation to ensure fair and defensible pay outcomes.
Quick Implementation Checklist
✅ Review how your team currently uses salary data
✅ Audit your internal pay equity before referencing market data
✅ Train managers on interpreting compensation ranges
✅ Use SimplyMerit to document and guide decision-making
✅ Align pay actions with internal values and business goals
Call to Action
Are your managers relying too heavily on salary websites to make pay decisions? It’s time to reframe compensation as a judgment call—not just a data pull. Explore how SimplyMerit supports fair, aligned, and well-documented compensation decision-making for your organization.
👉 See SimplyMerit in Action