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Benchmarking and Corporate Pay Structure
A companies pay structure is the method a company uses to administer a "pay philosophy" (Ojimba, 6). Pay structure may be determined by a number of distinct factors including benchmarking. Benchmarking tells a company how many jobs need to be compensated for and the total amount of money needed to compensate these jobs (Ojimba, 7). It enables companies to match internal jobs with those of competitors, gain insight into their industry and helps link jobs to content and not just titles (Ojimba, 7). Benchmarking puts value in a job instead of value in a particular person. Benchmarking is nothing more than a process allowing a company to make pay comparisons for a job typically to jobs outside the organization in question but sometimes within the organization itself. This process helps establish a hierarchy of jobs that validates the worth of jobs within a company. Pay structure within an organization is often assessed using benchmarking.
When companies benchmark their positions they can establish a future pay structure that helps attract, motivate and subsequently retain good people. The pay structure within an organization is the foundation with which an organization can accomplish this. The pay structure should include a combination of three vital components, which include: base pay or salary, incentive pay (cash or stock) and benefits or other non-financial base rewards (Ojimba, 1). A solid pay structure enables a company to remain competitive, and a consistent structure helps provides both the company and employees a "frame of reference" when discussing salary (Ojimba, 1).
Pay philosophies are easily structured via benchmarking. This process enables skills analysis and helps track employee proficiency within a job (Ojimba, 1). An employee may opt to use an employee-proficiency method of payment based on data garnered from benchmarking. This method links pay to the market value of the job, which doesn't limit employees to small merit increases every year (Ojimba, 3). Instead compensation is evaluated based on skills and the proficiency an employee has within a certain job role.
In some cases through benchmarking a company may find it in their interests to pay employees more than what the market is offering. This may help motivate and retain hard to fill positions or areas where a company is experiencing high turn over.
References:
Ojimba, E. "Pay philosophies." 26, Sept. 2005:
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