Who or what determines the job value?
What do I pay my newest recruit? A realistic question but in a competitive society, organisations with fixed pay grades and human resource specialists unfamiliar with developing compensation and reward schemes, it can become a formidable task. It’s no secret that the key to attracting and retaining your top performing employees is recognising and compensating them appropriately.
When the occasion arises to make a job offer, many organisations find themselves at a loss about calculating employee compensation for a new or vacant position. Without an in-house expert and lacking information on competitive salaries, benefits trends and inexperience in estimating employee compensation, organisations generally resort to guessing games based on questionable data which in the long run places them at a disadvantage.
But consider this scenario from the other end of the spectrum – that is the newest recruit perspective. Accepting your current/prospective employer’s market value assessment without doing your own research is an expensive gamble which impacts on potential loss income. Questions must be asked of how these organisation accurately compute a fair market value of your worth. Quite simply, if you don’t value yourself highly, what makes you think others will? By knowing your market value, you can persuade (or hopefully convince) your employer about giving you the pay you deserve.
So where do organisations go from here? You have reviewed the candidates, applied your best interview strategies, completed your reference checking, looked at the job’s market value and now you’re ready to make someone a job offer. Organisations often take two typical approaches to determine job salaries: random to research-based or more formally classified as a market-based, or Job content emphasis.
Many employers look first to the external market to establish and benchmark their own compensation levels. When employers delve into salary data, it’s important that they not only uncover issues such as demographics of the labour market, but use jobs that are easily defined; closely resemble jobs performed in other organisation or industries that match at least 70 per cent of job duties; representative of all levels of the organisation and important to the organisation’s internal hierarchy.
Alternatively, for those employers that use a formal job content evaluation approach, the focus is how a job compares to other jobs in the organisation and is essentially a philosophy and value statement from that organisation. This evaluation method will also scrutinise external market data as part of the process although the information collected is supplemental rather than the primary focus. In either case, the organisations internal job worth hierarchy is influenced by the value of jobs as established by the external market.
Why should this be considered? It has been argued, when employees perceive that the compensation policy provides fair compensation and rewards, employee engagement and retention improves. The first step to assess market value is to match your job description and not job title to a benchmark job. The problem with trying to match pay to job titles, are that titles and their associated responsibilities are not always consistent across organizations. The next step is to select or assess compensable factors. A compensable factor is any criterion used to provide a basis for judging value. The generic compensable factors are skill, effort, responsibility and working conditions but other variables can be added.
The next step and closely related to the previous step is to assess employer factors. Salaries vary across locations, industries, and organisational sizes. Salaries are also affected by job’s position within the organisations pecking order: the number of people a job may supervise and the role of the job’s supervisor. The final step and depending on the individual, this could have been performed first, is to discover the median income for someone doing your job. This will serve as the baseline for determining whether you are being paid according to the market rate or not. To discover the salary range check salary scale websites, government figures, job portals, competitor’s careers page, free HR/recruiter salary reports and finally personal, professional and social media networks. With the information you have gathered from these various sources and the previous steps mentioned earlier you can put together an adequate baseline pay range.
Of course, economic recession situations can create large and unpredictable disruptions in pay scales in specific occupations. For example, positions such as investment bankers and analysts. But according to some experts, labour pricing is generally not that variable and dependent on whether the economy is up or down. Remember for many organisations the relative value of jobs internally is just as important as external competitiveness. However, determining job worth is usually based on the organisation’s compensation philosophy or on a compensation strategy that fundamentally ensures that employees believe they are being compensated fairly in relation to their peers, both internal and external.