How an organization positions its pay structure and pay rates relative to prevailing market levels is a critical element of its rewards strategy.
“We pay at market.”
“We pay at the 75th percentile.”
“We pay above market for critical skills and at market for others.”
These three expressions of competitive posture relative to market are the most common. The simplicity of these policy statements is attractive. Yet they are simplistic, if not accompanied by a specification of:
- How the “market” is defined,
- How prevailing market levels are determined
- What is included in the definition of “pay.”
- Paying “at market” seems to be a reasonable competitive posture. But pay must be defined, the market must be defined and the posture must be defended.
Organizations must devise a strategy that best fits its context and that is justifiable. Both the economic impact and the behavioral impact of the competitive posture must be evaluated and a balance achieved.
An excerpt from:“Competitive Posture: Critical Element Of A Rewards Strategy” by Robert J. Greene, PhD
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