Pay Strategy Process

Process of Establishing Pay Rates for Different Positions

Following steps are required to establish pay rates for different positions in a fair manner:

Job analysis: All the contents and requirements of the job are analyzed, which helps to establish standards of job performance.

Job evaluation: In the next step, the relative value of every position in the organization will be determined and then this value will be created in the money that will be used as the basic wage for the particular job position (Heneman & Werner, 2005).

Wage survey: In this step, salary surveys are conducted to determine the salary levels in the related industry/sector for similar jobs. The problems of other organizations are also considered.

Developing pay structure: From the last steps of the process, an equitable wage structure is prepared by determining the compensation legislation, width of pay grades, difference between pay plans etc (Armstrong, 2012). This process helps to establish fair pay rates for the different positions in the organization on the basis of job values.

Linking between Strategic Compensation and Strategic HR Goals

The compensation strategy helps to determine the position of the firm in job market. It is a supporting strategy for the organizational HR strategy. HR strategy is always set in respect to the compensation area, so that employees could be aware about the organizational situation and can be motivated for performing the activities in order to accomplish the organizational goals. The objectives of HR strategy of an organization are to motivate the employees, increase their efforts, reduce work conflicts etc (Bohlander & Snell, 2010). The strategic compensation policy facilitates the employees an understanding about the value of each job and related pay structure for it. It helps to reduce the conflict among employees related to pay structure. At the same time, it includes different pay ranges and appraisal conditions, which motivate the employees to perform well by giving his/her maximum efforts towards achieving the organizational objectives. It also facilitates an effective position of the organization in job market (Jackson, Schuler & Werner, 2011).

Options to Determine Ranges and Rates for Pay

Following options are available for an organization to determine pay ranges and rates:

On the basis of job evaluation points: Through the data obtained with job evaluation, a market line can be developed an on the basis of it job value can be determined, which can be used for the determining pay ranges and rates (Mathis & Jackson, 2011).

On the basis of market banding: The pay in market is determined and through this maximum and minimum range can be determined by making it close to the job value.

Performance based programs: In this, an organization can determine the pay range on the basis of performance criteria on the basis of different factors (Greene, 2010).


Armstrong, M. (2012). Armstrong’s Handbook of Human Resource Management Practice (12th ed.). USA: Kogan Page Publishers.

Bohlander, G.W. & Snell, S. (2010). Managing Human Resources (15th ed.). USA: Cengage Learning.

Greene, R.J. (2010). Rewarding Performance: Guiding Principles; Custom Strategies. USA: Routledge.

Heneman, R.L. & Werner, J.M. (2005). Merit Pay: Linking Pay to Performance in a Changing World (2nd ed.). USA: IAP.

Jackson, S.E., Schuler, R.S. & Werner, S. (2011). Managing Human Resources (11th ed.) USA: Cengage Learning.

Mathis, R.L. & Jackson, J.H. (2011). Human Resource Management: Essential Perspectives (6th edd.). USA: Cengage Learning.