Organizations develop and implement salary structures to provide a framework for administering their employee compensation programs. Effective administration of a compensation program requires a balance between the pay levels for employees inside the company—internal equity1—and the pay levels those employees could command in the company’s recruiting markets—external equity.
How to Develop a Salary Structure
Most companies determine their employee pay levels by evaluating market pay levels for the majority of their jobs. Compensation professionals call these “benchmark jobs.”3 In contrast to benchmark jobs, non-benchmark jobs are not evaluated for the purpose of determining market pay levels, usually because market data is unavailable.