by Lua Leggett

Pay policies and market rate analysis

Pay policies will encompass a broad range of information, from details of basic pay thresholds to specific policies relating to areas such as paternity and maternity leave, sickness and absence policies, holiday and sabbatical leave. Most, if not all, of these should be laid out in your employee handbook.

It is worth familiarising yourself on a regular basis with these policies so that when an individual need arises, such as pending maternity leave, you will be able to provide your team member with correct up-to-date information and guidance on how they should proceed.

Pay grading and progression

One of the vital ingredients of an effective reward management strategy is the development and maintenance of a competitive pay and benefits position – one that enables organisations to attract and retain high-quality people. You may, as a line manager, have recruitment or retention targets as part of your own overall performance benchmark.

I am suffocated and lost when I have not the bright feeling of progression.

Margaret Fuller, American journalist and women’s rights activist 1810-1850

Being able to offer the appropriate level of pay is an integral element of recruiting (or retaining staff) and line managers often complain that they cannot get (or keep) the people they want as the pay is not competitive enough. To establish whether or not this is true, a first step is to find out from HR what the process is for establishing pay grades or bands in your organisation and be sure that you are comparing like for like on job titles or job evaluation criteria.

Market rate analysis

Market rate analysis is the process of collecting and comparing data on the rates and benefits provided for similar jobs in other organisations and the rates at which pay is increasing elsewhere. It is conducted by surveys that review published data from various sources. The aim of market analysis is to

  • Obtain relevant data
  • Deduce from this data the going rate for a position
  • Maintain a competitive pay and benefit position in relation to the market
  • Inform decisions on levels of pay for individual jobs and scales
  • Provide guidance on pay review decisions concerning any adjustments
  • Support a market pricing approach to valuing jobs
  • Offer guidance on internal differentials by reference to external differentials.

I don’t pay good wages because I have a lot of money; I have a lot of money because I pay good wages.

Robert Bosch

Market analysis is all about judgement and compromise. Judgement has to be exercised when selecting sources of data and then analysing that data. Compromise is required because it is not possible for any survey to show the single correct rate for a job and discretion is required within the backdrop of the organisation and current business drivers.

As a line manager, you can help the organisation on two fronts:

  1. If you understand the process, you will be able to clearly articulate to members of the team how and why the rate of pay has been attached to the role/job and demonstrate that an objective process has been followed to achieve a fair result
  2. During any interviewing process you can ask for evidence, such as pay slips and P60s, so you can provide in-depth and accurate information for the HR team on rates of pay and benefits currently available elsewhere to prospective new recruits. Your HR team will then have accurate and real information to absorb into any future pay discussions that take place.