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Job Analysis and Market Pricing

The Connection Between Job Analysis and Market Pricing

Market pricing can help organizations arrive at an externally competitive wage that will help them recruit, retain, and motivate their workforce; but equally important is developing an accurate sense of a job’s internal worth and value to the company. This becomes even more critical as the size of the organization increases and employers have to create pay grades and pay structures to ensure equitable compensation for similar jobs. Market analysis is not just externally pricing an individual position; it is one step in the overall process of determining a fair compensation structure.

The challenge with market pricing alone is that it only gives companies part of the story: the external value, or base pay, for a position. It does not take into consideration the internal job worth which may not align to the external market because of a variety of factors, including the number of individuals employed by the company, geographical region, budget of the company, as well as specific company position requirements.

Let’s compare an administrative assistant position in a small family-owned business with an administrative assistant in a large corporation. The responsibilities vary; the complexity of the job differs as well as the training and education requirements. It follows that base pay would also differ. A small family-owned business is not going to be able to offer or compete with the compensation package on par with a large fortune 500 corporation. Internal job evaluation helps companies develop and align salary and benefit structures relative to the worth of the jobs within their organization.

Developing fair compensation structures is an art and a science, and this is where the science comes in. The process involves:

  • Analyzing positions and developing job descriptions. What are the requirements for these positions? What are the critical job functions? Accurate job descriptions will guide good decision-making through the rest of the process. Remember bad information in, bad information out!
  • Establishing benchmark titles. These are the titles that are common to your competitors. That is, identifying job roles and functions which are generally found within other companies and organizations regardless of industry and have enough similarities for a fair comparison.
  • Identifying relevant salary sources. Opt for salary surveys that use best practice methods for collecting and cleansing the data and have the appropriate scope and size to accurately meet your business needs. It is critical to have the ability to drill down into the data to identify comparable organizations by employee size, budgets, and geographic regions. Also look for surveys that offer good job descriptors in order to match to your job’s specific roles and functions. Never rely solely on matching to job title.
  • Drilling down into requirements. Find good matches based on knowledge, skills and abilities including, but not limited to, education requirements, level of difficulty, level of supervisory responsibility, financial responsibility, and other factors critical to your business operations.
  • Pricing jobs based on your compensation philosophy. Are you going to lead, lag, or meet the market? How aggressive are you going to be in recruiting? Given our budget, how much is this job worth to us? How much does it contribute to our goals? Not all jobs need to pay at or above market; all positions, though, must offer competitive base pay and benefits in order to attract critical talent.

HR Consultants, Inc. strongly recommends that companies conduct both external market pricing and internal evaluation processes. External analysis alone doesn’t deliver all of the data that you need to develop a competitive compensation structure. Focusing solely on external marketing pricing can lead to pay disparity, feelings of inequality, and other issues that can undermine your company culture and expose it to legal ramifications. By using best practice compensation methods to determine both external and internal worth, you can mitigate those risks, and offer pay and benefits that will allow your business to meet its goals.

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Human Resources Report

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*Reproduced with permission from Human Resources Report, 32 HRR 453 (May 5, 2014). Copyright 2014 by The Bureau of National Affairs, Inc. (800-372-1033)



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