Often employees and their managers are focused on getting the employee’s pay level to the midpoint of the base salary range or above.
There is a myth that the midpoint number is “market.” It isn’t.
So, ensuring that each employee has a compa-ratio of 1.0 (or 100%, the midpoint) or above shouldn’t be an employer’s goal automatically.
Instead, the “market” for a job is the competitive base pay range assigned to the role. That is in turn based on reliable and valid salary survey data used in the market pricing and job evaluation process.
Remember all employees employed by other organizations are not paid the same base salary.
“Market” is never a single number. It is always a range from minimum to maximum.
Where should an employee be paid within a range? Refer to the image below:
· The bottom third of the range is for employees who are Learning.
· The middle third of the range is for employees who are Demonstrating.
· The top third of the range is for employees who are Role Modeling.
Employees perform their job differently. They each come with their own set of skills, relevant years of experience, work location, tenure, and education. Their ability to deliver the needed results for their employer varies.
All these factors can be used to justify paying employees different base salary rates within the range from minimum to maximum.
So, stop focusing on the midpoint. It isn’t “market” and should not be the sole point of reference as you make pay decisions.
Use the full range. Don’t be afraid to differentiate the base salary of your employees. Just be sure your decision-making process is standardized, documented, and consistently applied.
And don’t forget to compare the pay of new hires to current employees. Align a new hire’s pay to that of employees with similar experience, education, performance, etc.
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