Have you ever wondered what goes into determining how much money you make? Most companies map roles and descriptions with similar organizations using tools like our annual salary guide. But each employer has their own compensation philosophy. Employers consider responsibilities, complexity, importance of the role and market availability, among other components, to arrive at a range for each position. Here are a few other salary factors that determine your pay.
Wages for employees in the same occupation and position can vary drastically from one state or city to another. This is typically a function of the cost of living. An Accounting Manager in San Francisco, CA might earn more than the same position in Tulsa, OK.
Supply and demand in your city can also be a factor. For instance, if a local university is graduating a large number of finance majors, then entry level roles in that area may not need to be hired at a premium. The talent is easily available, and supply is more than demand. The opposite may be true for a position that is in high demand.
Our annual salary guide provides variances for all of the key markets throughout the United States. You can figure out the average salary range for your particular job market. Take the average base salary for your position and multiply it by the variance for your area.
Industry and employer
The industry in which an employee works strongly affects his or her salary. An accounts payable clerk working for a software and technology company may earn more than one working for a nonprofit organization.
The employer’s place in the market also affects salary. Startup companies, even in the profitable tech sector, may pay less in base compensation than larger, more established companies. However, your total compensation could be more working for a startup once you consider bonuses, stock compensation, and other benefits.
The employer’s clientele may also factor into salary. A portfolio manager working for a commercial bank may make less than a portfolio manager working at a highly specialized boutique firm that only works with high-end clients.
At the end of the day, what a worker can actually accomplish is the biggest factor that influences pay. Employers look at years of experience as a good indicator of an employee’s skill and ability. A highly skilled auditor with Big 4 experience will usually have experience working with publicly traded companies, where they are exposed to much more complex accounting and tax issues. That auditor will typically earn substantially more than an auditor who has only worked for a local firm focusing on small business clients.
Professional certifications and licenses can have a significant impact on salary, but the impact of different credentials varies. According to StartHereGoPlaces.com, an accounting education website sponsored by the American Institute of CPAs, people with a CPA license can expect to make 10-15 percent more than those without a license. This is true in both public and corporate accounting. MBA students can make as much as 50 percent more, according to Forbes. Professionals in government accounting who earn the Certified Government Auditing Professional (CGAP) certificate increase their earning potential by 40 percent, according to the Institute of Internal Auditors. Each credentialing organization offers its own estimates for how their program affects salary, so doing some research on the certifications in your area of expertise is essential.
Keep in mind that base salary isn’t the only component. Your total compensation also includes bonuses, benefits, profit sharing and other perks. In some cases, total compensation adds up to two or three times your base salary. To test your knowledge of the labor force and salary figures, take our quiz!