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The difference between organization-based and incumbents-based calculation methods

9/13/2023

Organization-based calculation (ORG) - firstly, the average value is calculated for each distinct organization (e.g., for each job family level), and then averages based on these are computed.

Incumbents-based calculation (INC) - each employee is treated with equal weight, and all employees contribute to the calculation of position averages. The drawback of this method is that organizations with a large proportion of employees influence the distribution of position average salaries.

Our approach - we use the organization-based calculation method.

Recommendation for you - choose the approach that suits you best and consistently use it.

Example:
Let's consider organizations A (3 employees), B (2 employees), C (9 employees), D (2 employees), and E (4 employees). To obtain the individual-based average salary, we sum up the salaries of all employees and divide the result by 20 (the total number of employees across 5 organizations). To get the organization-based average salary, we first calculate the internal average salaries for each organization and then find the overall average based on these internal averages (sum up the organization's internal average salaries and divide by 5).

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