Market analysis is an extremely effective tool for employers to both retain and attract the best possible candidates. It allows you as the employer to benchmark yourself in the area of the market where you believe your remuneration strategy would be best suited.

Remuneration can be broken down into various elements, in most instances these can be measured against the market under two different categories – Basic Pay and Total Cash. Basic pay is purely the basic pay portion of remuneration. Total cash is built up of the basic pay and any other variable elements such as bonuses etc.

The most common area of the market for employers to benchmark their basic pay element is the market median – this is the middle most figure within any sample of data. In companies where there is a desire for a performance culture it might be recommended to benchmark your basic at the market median, but benchmark your Total Cash somewhere above the median point. What this allows is the ability for employers to be extremely competitive within the market and pay their employees or prospective employees somewhere above the market, provided they are receiving the required levels of performance. Some employers tend to make the mistake of benchmarking their basic pay above the market without realising that they are fixing their costs at a higher level than required without the guarantee of receiving the required results. By keeping your basic portion at the market median and your Total Cash somewhere above that point you are keeping your fixed costs down and only increasing this when targets and KPI’s are met, while still being able to attract and retain strong employees or candidates.

In addition to market analysis Employers can evaluate jobs. The evaluation of jobs allows you to create an efficient remuneration and benefits structure based on the importance of particular roles within the organisation. The evaluation of jobs can be achieved through two common methods:

Analytical Evaluation which analysis the job using various weightings for common elements found in roles. These could be elements such as the required Knowledge, Skills or level of responsibility required to perform the role. Each job is assessed resulting in a final score for each of them. These scores then form the basis for any grading structure. The most commonly know system for evaluating jobs is the “Hay” system, this is commonly recognised as a sound and robust system for evaluating jobs. Analytical job evaluation is the only method of Job Evaluation which can strongly uphold any disputes based around discrimination on the basis of pay.

Non-Analytical Job Evaluation does not analyse jobs using weightings and doesn’t use any form of calculations in deriving at its evaluation. Instead it uses areas such as the market to dictate the value and importance of a job.

No matter which method of evaluation is used the overall objective is still to achieve some form of structure in your compensation and benefits strategies. By introducing a grading system both you and your employees will be able have a clear and transparent understanding of where they are in the organisations grading structure, what salary range and benefits they may receive at the various levels and what might be expected of them to move through the grades.