There are two components that employers decide:

1 – What percentile of the external market do you want to target?

Example: “We target our total compensation opportunity at the 50th percentile.” This means that the employer is ensuring that their pay ranges are aligned to what their competition for talent is paying at the middle of the market.

2 – Where do you want to pay within that total compensation opportunity? In other words, what is your “Pay Delivery Philosophy?”

Example: “We pay our employees 90% or more of the market. Our employee pay is equitable, and we validate this on an annual basis. This is in alignment with our organizational values of inclusion, respect, and integrity.”

I typically see the first component defined by some but not all employers. The second component is usually not intentionally decided. It “just happens.”

Don’t let your pay delivery philosophy just happen. Plan. Do. Check. Act/Adjust. Repeat.

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