Is your organization wrestling with determining the marketplace “going rate” for your company’s jobs? Are you confused by salary survey data? If you answered “yes” to these questions, this article, which discusses the basics of market pricing, should be helpful to you.
Simply put, market pricing employs external wage survey data to determine the value of an organization’s jobs, as measured by market pay statistics. Compensation strategy is the foundation for market pricing. Each organization must decide how it wants to relate to wage survey data measures of central tendency (“the going rate”) from the perspective of base pay and total compensation. Some organizations pay more than the going rate to attract, motivate, and retain the best talent. Other organizations, due to funding constraints or their location in the business cycle, pay less than market. Still others pay similarly to market values. The point is “one size does not fit all.” There are many legitimate answers to the question, “Where do we want to be in relation to the pay marketplace?”
These components must be considered when using market pricing:
