What Are the Duties of a Compensation Analyst?

Compensation analysts examine internal and external pay factors.
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Compensation analysts examine internal and external pay factors.

At larger companies, human resources departments have a variety of specialists who oversee different aspects of employee recruitment and management. These can include payroll, recruitment, benefits, training and wellness specialists. A compensation analyst performs a variety of functions to ensure that a business can attract and retain top talent without blowing the company’s budget.

External Reviews

What one company offers its employees can have little relevance to another company’s ability to recruit and keep workers, but general market trends might affect how a business must compensate its employees. Compensation analysts review industry statistics, looking at compensation for employees based on job title, geographic location and industry. For example, if your area’s unemployment rate is high, you will be able to pay less for lower-level workers who can’t afford to move to find work. If you are competing with two other companies in your area for a limited supply of workers, you might have to expand your total compensation package to meet your hiring needs.

Internal Reviews

A compensation analyst reviews the total cost of labor for a business, including the overall expense for each employee. For example, in addition to wages and salaries, employee costs include payroll taxes, health care benefits, 401(k) and pension contributions, commissions, bonuses, relocation expenses, tuition, parking stipend, commuter pass reimbursement, contest rewards, paid time off, country club memberships, company cars and other perks and job-related expenses. Knowing the cost of each employee helps finance departments calculate and project overhead expenses and labor costs. Compensation analysts use this information to help in the annual corporate and department budget planning processes.


Once a compensation analyst has a handle on marketplace conditions and internal costs, she can review and analyze the company’s current compensation spending to determine if it’s in line with the company’s needs. For example, if employees receive a raise each year, they might eventually be paid more than the position is worth to the company. A compensation analyst will calculate the loss of productivity and replacement expense of terminating and replacing a longtime employee versus the cost savings of hiring for the position at a more realistic market rate.


Compensation analysts recommend the total package necessary to properly fill each position. This means offering a combination of pay and benefits that will attract the most talented and qualified employees within the company’s budget. For example, younger workers might be less interested in retirement and health insurance benefits and prefer higher pay and perks. Older workers might want just the opposite. A business that offers an employee a chance to quickly move into management or come on board with a higher title than a competitor is offering for the same position might be able to offer less compensation in exchange for the career boost.

2016 Salary Information for Compensation and Benefits Managers

Compensation and benefits managers earned a median annual salary of $116,240 in 2016, according to the U.S. Bureau of Labor Statistics. On the low end, compensation and benefits managers earned a 25th percentile salary of $87,120, meaning 75 percent earned more than this amount. The 75th percentile salary is $156,050, meaning 25 percent earn more. In 2016, 15,800 people were employed in the U.S. as compensation and benefits managers.

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