How BLS Wage Data Supports Reasonable Compensation
What Bureau of Labor Statistics wage data is, how it applies to reasonable compensation analysis, SOC codes, geographic adjustments, and its limitations for S-corp shareholders.
The Bureau of Labor Statistics (BLS) Occupational Employment and Wage Statistics (OEWS) program provides some of the most widely cited wage benchmarks for reasonable compensation analysis. CPAs frequently reference BLS data to support shareholder salary recommendations. Understanding what the data represents, how to apply it, and where it falls short is essential for building defensible positions.
What Is BLS Wage Data?
The BLS OEWS program surveys employers across the United States to collect wage and employment data by occupation and location. The data is published annually and includes hourly and annual wage percentiles (10th, 25th, 50th, 75th, and 90th) for hundreds of occupations.
For reasonable compensation, the relevant output is typically the annual wage estimates for occupations that correspond to the shareholder's duties. A CPA firm owner might look at "Accountants and Auditors" or "Chief Executives." A consulting engineer might look at "Engineering Managers" or "Civil Engineers."
How It Applies to Reasonable Compensation
Under IRC §162, compensation must be reasonable for services rendered. One of the key factors courts and the IRS consider is comparable compensation—what would an unrelated third party pay for the same services? BLS data answers that question at a broad level.
If the 25th percentile for "Financial Managers" in a given metro area is $95,000 and the 75th percentile is $165,000, a shareholder performing that role might reasonably fall somewhere in that range. The exact placement depends on experience, company size, and other factors—but the BLS range provides an objective starting point.
SOC Codes and Occupation Matching
BLS uses the Standard Occupational Classification (SOC) system. Each occupation has a six-digit SOC code (e.g., 11-3131 for "Compensation and Benefits Managers"). Matching the shareholder's duties to the correct SOC code is critical.
A small business owner might act as CEO, sales manager, and operations manager. In those cases, practitioners may use a primary SOC code, a weighted average across multiple codes, or the highest-responsibility role as the primary benchmark. The choice should be documented: explain why the selected occupation(s) best reflect the services performed.
Geographic Adjustments
BLS publishes wage data nationally and by state and metropolitan area. Wages vary significantly by location.
Whenever possible, use state or metro-level data. For remote workers or businesses serving national markets, the analysis may support national data—but the rationale should be stated and documented.
Limitations of BLS Data
BLS data has important limitations that practitioners should understand:
Because of these limitations, BLS data works best when combined with industry surveys, company-specific factors, and the other IRC §162 factors. It provides a defensible benchmark, not a complete answer.
Key Takeaways
- Objective benchmarks — BLS provides publicly available, authoritative wage data
- Match SOC codes carefully — align shareholder duties to appropriate occupations
- Use geographic data — local benchmarks are more relevant than national averages
- Know the limitations — employee-only, aggregate, lagging, no industry breakout
- Combine with other data — BLS is one strong input in a multi-factor analysis
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