Looking to Benchmark Pay?
INTRODUCTION
Each employee in an organization is paid a salary which is a fixed compensation cost to the organization. These salaries vary greatly, with executives earning as much as a hundred times more than an entry-level employee. This variation is not by chance. It is rationally established through a salary structure – a hierarchy of salaries.
Organizations develop a salary structure based on internal factors and the external marketplace. Factors such as the business strategy, compensation philosophy, current pay practices, the hierarchy of jobs, the defined external marketplace, and labor law all contribute to the development of a salary structure. An effective salary structure will thoughtfully integrate these factors in the overall design and contribute to fair, equitable, and competitive compensation within a company.
For the purpose of this course, we will assume that there is a formal hierarchy of jobs in place that has been established using a job evaluation plan. As a point of reference, the Distance Learning Center (DLC) Course 33, Job Analysis and Job Descriptions, and Course 34, Using Job Evaluation in Your Organization, show how to create an internal hierarchy of jobs.
We are now ready to create a salary structure. We will teach you how to do this by:
- plotting your organization's jobs on a matrix
- establishing a pay policy line using a scattergram
- using this line to determine median pay rates which become the basis for establishing a salary structure and ranges
You will then learn how to maintain this salary structure, including how to evaluate its market competitiveness using research software.