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Home » HR Processes » Compensation and Benefits » Compensation Strategy and Compensation Policies » Compensation Position on the Pay Market

Compensation Position on the Pay Market

The compensation policy and compensation strategy should set the position of the organization on the pay market and job market. The position is very important for fair position of the organization on the job market, which supports the main role of the HRM Function – to get the right talent into the organization and to keep them. It is about the attraction and retention role of the HRM Function.

The compensation policy is pretty simple, when you understand the basic rules of the pay market. Many consulting services companies provide very expensive consulting services to set the correct position of the organization on the pay market, but the general rules to set the correct position on the pay market are just two:

• Complexity
• Bigger organization

The more complex and sophisticated services the organization offers to the clients, the more competitive the compensation strategy and compensation policy has to be. The sophisticated products and services need employees who are not paid at the market average. The sophisticated products and services usually need a more attractive pay market position and the base position for these organizations starts at Q3 of the pay market.

On the other hand, the bigger the organization is the lower the pay market position can be. The bigger organization can offer a lot of the career opportunities to the employees and it can afford the lower pay market position as it can move the employees around the organization. The bigger organization have a huge personnel expenses budget and they are focused on a very detailed compensation policy management as it can result in huge costs to the organization.

The position of the compensation policy on the pay market is not difficult to set, but it is very difficult to keep the position as the line management always fight for a better position on the pay market as it makes the life of the line management easier, but the organization can suffer from the high personnel expenses costs.