WageWatch Ibrief Blog



A company’s pay program generally includes base pay, incentive pay, and benefits paid to employees in exchange for work performed.  To determine employee pay levels, companies must strike the balance between affordability and employee motivation.  Other factors that influence pay levels are social, economic, legal, and political.  All these factors can make compensation management a complex and important part of the business. Ramifications of inadequate pay levels are employee turnover, poor performance, and reduced productivity.  

 Major factors to consider when determining your pay levels and pay scales are:

  •  Type of business – For jobs that are specific to your industry, you will be competing for talent only or primarily within your industry.  For some jobs you may be competing across several industries.
  • Company size – Company size can impact job requirements, for example, sales volume will have an impact on pay levels of your sales force.
  • Geographic Location – Cost of living impacts pay levels in each market, therefore, the exact same job can have widely different pay levels depending upon the city market it is located in. 
  • Types and levels of skills and knowledge required – Ensure that you have your jobs graded appropriately according to the skills and knowledge that is required for the job. 
  • Union affiliation or no union affiliation – The union will in most cases dictate pay levels for union employees and this will also impact your pay levels for your non-union employees at a union worksite and/or market.  In addition if you are non-union but competing in a largely union marketplace, you may need to compete with the union pay levels.
  • Total compensation package – In order to evaluate correctly the market pay levels, you need to collect market information regarding all forms of pay for each job including base pay and incentive pay.  There are also other factors that can impact base pay levels such as company benefits and company perks.
  • Management philosophy – Your companies pay philosophy on whether to lead, lag or match the market should be part of and in line with the management philosophy of the company.
  • Company profitability – Company revenues and budgetary limitations need to be considered when determining pay levels.

 Effective compensation management will align with company objectives and focus on internal equity, external competitiveness, employee contributions, and program administration. Compensation programs must be flexible enough to reflect the different needs of the individual and the organization, and the changing needs over time.

 Organizations can choose to pay more than the industry average, or pay less than their competitors’ average and rely on non-monetary rewards such as recognition events, achievement celebrations, and working in a pleasant environment. A competitive pay level can help contain labor costs, enlarge the pool of qualified applicants, increase quality and experience, reduce voluntary turnover, and discourage unionization

 At WageWatch our compensation consultants are focused on your organization’s compensation needs and ready to help you ensure that your compensation programs are supporting your company’s business strategy and objectives. We can provide your business with compensation surveys and salary reports to help you establish a budget for your merit pay program, including bonuses and incentives. Our innovative company is a leader in the collection of data for surveys and salary reports, which allows us to provide services to a wide range of industries in both the private and public sector. To learn more about our compensation surveys, salary reports and other services, please call 480-237-6130 or contact us online.

This entry was posted on Thursday, June 5th, 2014 at 5:30 AM and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.