HRM textbook

370 PART 4 COMPENSATION
FIGURE 11-8 The Market/
External Wage Curve
Jobs market wage rates
Jobs market wage rates
Jobs point values
Jobs point values
Many of these sites, such as Salary.com, provide national salary levels for jobs
that the site then arithmetically adjusts to each locale based on cost-of-living formulas.
To get a real-time picture of what employers in your area are actually paying for, say,
accounting clerks, it s useful to access the online Internet sites of one or two of
your local newspapers. For example, the South Florida Sun-Sentinel (and many
papers) uses a site called careerbuilder.com. It lists career opportunities in other
words, just about all the jobs listed in the newspaper by category and, in many
instances, their wage rates (www.sun-sentinel.com/classified/jobs).
11. Draw the Market (External) Wage Curve
The current/internal wage curve from step 9 is helpful. For example, showing, as it does,
how a job s current pay rate compares with its points helps the employer identify jobs
for which pay rates are currently too high or too low, relative to others in the company.
(For example, if a job s current wage rate is well above the internal wage curve, it
suggests that the present wage rate for that job is inequitably high, given the number of
points we ve assigned to that job.)
What the current (internal) wage curve does not reveal is whether our pay rates
are too high, too low, or just right relative to what other firms are paying. For this,
we need to draw a market or external wage curve.
To draw the market/external wage curve, we produce a scatter plot and wage
curve as in Figure 11-8 (left and right). However, instead of using our firm s current
wage rates, we use market wage rates (obtained from salary surveys). The market/
external wage curve compares our jobs points with market pay rates for our jobs.
12. Compare and Adjust Current and Market Wage
Rates for Jobs
How different are the market rates others are paying for our jobs and the current rates
we are now paying for our jobs? To determine this, we can draw both the current/
internal and market/external wage curves on one graph, as in Figure 11-9. The market
wage curve might be higher than our current wage curve (suggesting that our current
pay rates may be too low), or below our current wage curve (suggesting that our
current wage rates might be too high). Or perhaps market wage rates are higher for
some of our jobs, and lower for others. 60
Based on comparing the current/internal wage curve and market/external
wage curve in Figure 11-9, we must decide whether to adjust the current pay rates
for our jobs, and if so how. This calls for a policy decision by management. Strategic
considerations influence this decision. Do our strategic aspirations suggest we
should pay more, the same, or less than competitors? For example, we might
decide to move our current internal wage curve up (and thereby give everyone a
raise), or down (and thereby perhaps withhold pay increases for some time), or
adjust the slope of the internal wage curve to increase what we pay for some jobs
and decrease what we pay for others. In any case, the wage curve we end up
(the green line in Figure 11-10, on page 372) should now be equitable internally
(in terms of the point value of each job) and equitable externally (in terms of what
other firms are paying). 61