How to Calculate Equity in Salaries

by Charlotte Johnson

In a business world that is ever-competitive, companies must offer their employees salaries that are comparable to the salaries offered by other companies. Salary equity is a term that describes a salary that is comparable to other individuals' salaries in similar positions. If an employee is asking for a raise or looking for a job, he may want to calculate salary equity. Also, if a business wants to maintain its competitive edge, it must periodically analyze salary equity.

Examine the salaries of individuals in similar positions within a city, county or state. Many businesses disclose salary information as a part of a quarterly or annual financial report.

Add together the salary data that you have obtained. For example, if you are looking at bank teller positions in a particular city, you might find the following examples of salaries: $35,000, $36,500, $43,000, $47,500, $38,000 and $40,000. Add these salaries to get a total of $240,000.

Divide the total from Step 2 by the number of salaries that you added. In this example, you would divide $240,000 by 6 to get an average salary of $40,000.

Make necessary adjustments in order to bring your salary request or salary offer in line with the average for that particular position. For example, consider a situation in which you are an individual who is applying for a bank teller position. If your prospective employer offers you $35,000 as a salary, you could counter by asking for $40,000, based on local averages. Within the salary negotiation process, you might consider accepting a lower salary if other benefits and perks were added.

Tip

  • Another way to investigate typical salaries for various positions is to consult the United States Department of Labor website (www.dol.gov/dol/topic/statistics/wagesearnings.htm), which offers salary statistics.

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