How much do we have to pay??

This is a common question, when considering compensation. The key here is not so much “how much,” but remaining consistent with your approach.

In compensation parlance, this is called your “compensation philosophy,” and includes a consideration for wanting to lead, lag, or match the market in general. In other words, do you want to — generally — pay more than the market median, less than that median, or pretty close to exactly that market median.

Seems simple, right? Well, the real answer, of course, is typical for human capital questions… It depends.

If you need cutting edge, high-in-the-food-chain talent, you simply must consider paying more than typical market rates. It doesn’t need to be much more, but it does need to be reasonably apparent.

If you don’t really need rocket scientists, and the learning and acclimation curve for new hires is minimal, and/or you can offer something else of significant value to employees & candidates, then consider paying something less than market rates. Your recruitment efforts will need to be more rigorous, and your selection criteria must be sound, but many organizations do this with some degree of success.

If you are like most organizations, then simply attempt to match general market compensation rates. The issue here, of course, is that compensation — and likely total rewards — will not be a competitive advantage for you; you’ll need to realize that lots of people are competing for the exact talent that you’ll attract.

The key isn’t really which philosophy you choose, it’s making sure you understand the impact and benefits of that choice, and have processes that allow you to succeed within those parameters.

Just keep your eyes open, and expectations reasonable. That’s all I’m sayin’…



Kevin Berchelmann

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