What Determines an Employee’s Pay: the Person or the Position?

While most organizations use some form of job evaluation to determine the worth of jobs, there are many factors to consider when valuing work. There are internal factors such as being fair and consistent with how employees are compensated. Therefore, organizations typically use the following techniques to measure a job’s value:

  • Perform a job analysis to collect information about jobs in the organization.
  • Develop job descriptions that describe the work being performed.
  • Place the jobs into a structure or hierarchy based on job content, skills required, and contribution to the organization.

Equally important are the external factors, namely measuring the marketplace to determine the market value of each job. To pay competitively in the marketplace organizations use salary surveys to market price their jobs. Using credible market data is crucial in attracting and retaining good employees.

Using internal job evaluation and external market pricing helps organizations determine what to pay for the job…

But what impact does the person have on his or her pay?

Focusing on the person means looking at the individual worth of each employee. To place a value on an employee’s performance, there are several key factors to consider:

  • Performance of the employee against the standards for the job
  • Contribution to the organization
  • Skills and competencies
  • Potential
  • Length of service

In short, the answer to the question is that most organizations pay for both the job and the person. It’s most likely impossible to separate the two because in many ways the person makes the job.


Note: If you enjoyed this article, check out my new bestselling HR book Pay Matters: The Art and Science of Employee Compensation.

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