Human Resourse Management

Topics: Employment, SWOT analysis, Policy Pages: 7 (1690 words) Published: May 18, 2013


This chapter discusses market-competitive pay systems and describes compensation surveys. Compensation surveys provide "snap-shots" of competitors’ pay practices. Survey information provides the reference points for establishing pay level policies. In this chapter we also learn statistical analysis of compensation surveys, integrating the internal job structure with external market pay rates, compensation policies and strategic mandates. These practices require compensation professionals' sound judgments for making recommendations that fit well with competitive strategies. Careful thought about the meaning underlying the facts and statistics is the key to successfully building market-competitive pay systems.


Market competitive pay systems play an important part in attracting and keeping the most qualified employees. Based on market and compensation surveys, compensation professionals build a market competitive compensation system. Strategic analysis is used which is an examination of the external market context and internal factors of a company. External market context is the “industry profile, information about competitors, and long-term growth prospects”. Internal factors consist of the “company’s financial condition, their functional capabilities”. A strategic analysis lets professionals see where they stand against other professionals. Compensation surveys collect and analyze competitor’s information, mainly focused on wages and salary practices. Benefits are also surveyed because a company’s benefit package is a key part of an employee’s salary package. Compensation surveys play an important part because they are used to get a good view of competitions wage practices which can help a company attract and keep an employee. Pay rate differences for jobs and the differences in employee contributions are represented by pay structures.

An existing analysis of your current compensation system should be a starting point and balancing internal equity to the external market considered, if appropriate. Determining what your compensation philosophy and how to align with your business strategy and goals will guide the type of compensation design such as a pure market approach, a blended approach or perhaps a broad banding approach to enhance or totally update your current compensation system.

The Basics of Market competitive pay system

Market-competitive pay systems represent companies compensation policy should be developed to fit in with the competitive advantage of a company. It has a role in attracting and retaining the most qualified employees. A well designed pay system should promote the attainment of competitive strategies. But paying more than necessary can undermine low cost strategies as it is an undue burden. It also restricts the company’s ability to invest in other strategic activities. Hence companies that pursue differentiation strategy must strike a balance between offering sufficiently high salaries to attract and retain talented people and providing sufficient resources to enable them to be productively creative.

Major activities for market competitive pay system

Compensation professionals create market competitive pay system based on four activities those are as follows:

❖ Conducting strategic system.
❖ Assessing competitors’ pay practices with compensation surveys ❖ Integrating the internal job structure with external market pay rates and ❖ Determining compensation policies.

Strategic analysis: Strategic analysis entails an examination of a company’s external market context and internal factors. External factors could include industry profile, information about competitors, growth prospects (short and long-term). Internal factors encompass financial conditions, marketing capabilities, available human resources etc.

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