Chapter 8. Market Pricing
Being aware of prevailing wage rates in the external marketplace is critical to an organization’s success. Employers need to keep a watchful eye on fluctuating pay rates and market price their jobs to maintain competitiveness. Market pricing is defined as the process of analyzing external salary survey data to establish the worth of jobs, as represented by the data, based upon the “scope” of the job (company size, industry type, geography, etc.). Market pricing has become the most common method of valuing jobs. More than 80 percent of companies use market pricing as their primary job evaluation method, surveys show. When jobs are market priced, the external market is the key determinant of job value that influences pay philosophy.
In this method, job rates are set based on the organization’s best estimate of the typical wage rates in the external market place for that job. Job descriptions are used to match appropriate jobs. Market data are analyzed and benchmark jobs are arranged into a job-worth hierarchy. Jobs with no market data are slotted using relative worth.
With so many salary surveys available, where does one begin sorting through the maze of data to arrive at competitive market rates? Where can employers find sound, unbiased data that correspond to the jobs they need to market price? How should an organization communicate its pay program to employees? These seemingly never-ending questions can make a compensation analyst’s head spin.
The successful ...