"How much do we have to pay in order to attract new recruits to work on this assignment?"
"We make sure that we pay 10% above market rates"
"What the company is offering isn't even up to rise in the cost of living!"
"Do we need the most competent workforce or do we go in for average ones?
None of these questions/statements are anything new to an HR manager or to the top executives in an organization. All of them talk about the market competitive pay strategy followed by organizations. A web definition of “Market Based Compensation System” defines it as the use wage and salary rates for specific jobs that are determined by continual and consistent analysis of the competitive job market. A market based compensation system could also be called a "Value-Based Compensation System" in that an employee's salary rates are based on the value the market places on that particular job and level of expertise. It is widely accepted that compensation is the most vital ingredient that helps organizations to attract, retain and motivate employees. Compensation surveys benchmark the various jobs and indicate the pay range for various jobs in the job market. But how essentially does the market rate a particular job? Is it is justified that organizations devote a lot of time and energy into designing a robust compensation structure that is at par with those of its competitors.
Some questions that arise in this regard are; Is market competitive pay the last word in the compensation strategy of the organization? How important are the intrinsic elements of compensation? Those organizations who choose to pay below market rates try to make up for it by extending other benefits like Work Life Balance, career development programs etc. Do employees evaluate the culture, values and other intangible aspects of organizations while planning for a shift? These aspects might be considered by an employee who has been with a particular firm is considering to move to another , but what about people who have never experienced the organization?
Now its upto the organizations to analyze the data available and devise their modus operandi Organizations can follow various compensation strategies; lead, lag or pay at par with the market rates. How big are the costs attached with being below or above the market rate? Are the compensation strategies same for the entire organization or does it differ for various group of jobs or employees. Do companies pay the most challenging jobs below market rate by justifying the quality of work being given to the employee or will such jobs be paid above market rates?
These are some of the aspects that we would like to discuss in the forum. Please pen your thoughts on these issues and others which you think are relevant in this context. We look forward to a lot of learning and an enriching experience.
