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Determining Pay


Designing and performing a pay survey is the process of determining the median or average compensation paid to employees at similar jobs. This is done by collecting compensation data from several employers and used to develop an understanding of the amount of compensation paid. Surveys may be designed to focus on one or more job titles, geographic regions, employer size, or industries. The purpose of pay surveys is to provide a means for comparison of salaries both within the company and particularly in the marketplace. A survey should be designed to examine appropriate jobs, give a summary of the data analysis (to help spot future trends), and should have sound methodology. It takes into account location and years on the job. A pay structure is based on the market (determined from the pay survey) as well as the job function (based on the job description) within the organization. This pay structure needs to compare comparable positions, utilize the job descriptions, and identify organizations to gather information. A pay structure is basically the organization’s method of administering its pay philosophy. It can be based on the idea that the job is compensated based on the jobs above and below it in the company’s hierarchy, or on market pricing, based on the going market rate. At times, a combination of the two is used. A pay structure helps to offer guidelines to employees as to who is paid what, why employees are compensated differently, and what each person’s role is within the company. Together these five steps work toward fine-tuning and justifying base wages based upon knowledge, performance, geography, and company philosophy.

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