Making Comparable Compensation Choices to Market Pay Rates

As an employer, you want to be offering competitive wages and benefits. So how do your compensation choices compare to those of similar organizations and within your industry? The answer isn’t always straightforward. There are numerous factors to consider. For example, the same job title doesn’t equate to the same responsibilities in different companies..

Understanding market pay rates and the variations in compensation choices among other organizations can guide you in making informed decisions about your staff's market salary. This not only ensures fair pay but also keeps you competitive in your industry.

Evaluating Your Current Market Salary

The first step towards making comparable compensation choices to market pay rates is to evaluate your current market salary. What are you paying your employees? Why are they receiving that market salary? What benefits or bonuses do you offer? This information should be documented for easy analysis.

Your company's budget is a significant factor to consider. Discuss with your finance team to understand what percentage of your expenses is allocated to payroll. You might be on track, have room to increase the market salary, or be overspending.

It's also crucial to offer equal pay for equal work. Be cautious when paying someone in the same position less or more than another person. Any difference in market salary should be justified and transparent. Discrimination based on variables such as gender and ethnicity can quickly lead to legal issues with pay equity laws.

Deciphering Market Pay Rates

When creating fair and competitive compensation plans, understanding market pay rates is essential. The market salary your competitors offer their employees is a critical factor when hiring for a role. Moreover, market pay rates are continually changing for various reasons, so staying updated requires the right resources.

These resources can guide you in making equitable and competitive decisions in today's job market:

• The Bureau of Labor Statistics (BLS) provides reliable insights and surveys into US market salary averages and trends based on positions and locations.
• Job Boards offer extensive search results that you can analyze to extract relevant market salary details based on job descriptions, locations, or companies.
• Career sites like com provide job listings and market salary estimates based on various factors that contribute to compensation packages.

Review information from these reputable sources and compare them to the roles and job grades in your organization. This can help you understand whether you're offering a comparable market salary or if you need to adjust your compensation. Regularly review the surveys and benchmark information to stay current with market pay rates.

Understanding Wage Differentials

If your compensation packages differ from others in your industry, don't worry! You don't need to overhaul everything immediately. There are certain wage differentials to consider. Sometimes, there are valid reasons for paying more or less than the average market salary of your competition.

• Company size and budget – Larger companies often have the privilege to offer higher market salaries to attract top talent.
• Same job title but different responsibilities – Jobs often have the same title, but the actual day-to-day activities vary depending on the company and employer.
• Cost of living – Geographical and cost of living considerations will dictate necessary base market salaries and benefits to manage them.
• In-demand skills – A company may be in desperate need of a certain skill and be willing to pay more than the usual market salary, driving averages up.
• Working conditions – Working hours, location, and commute times are all factors of working conditions that will inflate or reduce compensation.
• Benefits – Some companies offer lower base market salaries but compensate for the differences in benefits.

Implementing Market-Driven Compensation Choices

Market-driven compensation choices allow you to benchmark your packages against industry competition and make adjustments as the market changes. The goal is to remain competitive, attract and retain staff, and encourage productivity without breaking the bank.

Start by establishing a compensation philosophy. Will you pay the average, less, or more for comparable jobs in the market? Access surveys and market data that you can align with your organization, industry, and the roles you offer. You'll want to create pay ranges and grades and be transparent about them with your team. Review them regularly to ensure you're adjusting to market trends.

By following these steps, you can make comparable compensation choices to market pay rates and market salary.