Human Resource Management – Pay Rates

Pay Rates

If the organization's main concern is to match what people are earning in comparable jobs, the firm can base pay directly on market research into as many of its key jobs as possible. To do this, the organization looks for survey data for each job title. In light of that knowledge, the organization decides what it will pay for the job. When job structure and market data conflicts, organizations have to decide on a way to resolve the two. One approach is to stick to the job evaluations and pay according to the employee’s worth to the organization. Organizations that do so will be paying more or less than they have to, so they will likely have more difficulty competing for customers or employees. A way to moderate this approach is to consider the importance of each position to the organization’s goal.

At the other extreme, the organization could base pay entirely on market forces. However this approach also has some practical drawbacks. One is that employee may conclude that pay rates are unfair. Two vice presidents or two supervisors will expect to receive similar pay because their responsibilities are similar. Also, if the organization’s development plans include rotating managers through different assignments, the managers will be reluctant to participate if managers in some departments receive lower pay. Organizations therefore must weigh all the objectives of their pay structure to arrive at suitable rates.

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