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It might come as a surprise to many workers, that most employers don’t just pay the lowest amount they can get away with. Instead, for many companies, wage levels reflect their business philosophy as well as their budget. How do companies decide how much to pay their employees?
Usually organizations with 300 or more employees have defined pay ranges for their jobs based on market rates in their geographical area for industries with which they compete, Jim Hudner, managing director of executive compensation consultant Pearl Meyer in Boston, told Bloomberg BNA.
The pay ranges depend on a company’s ‘‘defined competitive posture,’’ Hudner said. An organization may adopt different postures for different jobs, based on the job’s importance to their organization. For example, a company may decide to recruit top-notch performers for one department but make do with ordinary performers for a less visible department, Hudner said.
‘‘The range is reflective of the worth of the job, but where an individual would be paid within the pay range would be based on the attributes and characteristics of the individual employee,’’ Hudner said.
Hudner also mentioned ‘‘internal comparability,’’ which rests on an internal assessment of the complexity of the work and education level required by a position compared with other positions in the company.