What is market based sallary?

With traditional, broadband, market-based and step structures all as options, organizations face many choices in terms of the types of salary structures they can implement. In an effort to determine which structures are most commonly used today, and how that application varies by industry, organizational size and employee workforce segment, WorldatWork and Deloitte Consulting LLP developed and conducted the “Salary Structure Policies and Practices” survey in July and August of this year. The results, which include responses from more than900 WorldatWork members and nonmembers, were released in mid-November.

For a10-year benchmark, survey results were compared to the article “Choosing the Best Salary Structure for Your Organization,” written by one of this article’s authors, Gregory Stoskopf, for the fourth-quarter2002 WorldatWork Journal. The2002 article is still applicable to discussions of the various types of salary structure designs used today.

Specific Survey FindingsHighlights of the survey findings are as follows:

• While traditional and broadband structures were the most common structures used in2002, a dramatic shift to market-based structures — those with30% to70% range spreads — appears to have occurred in the intervening decade. In2012, market-based salary structures were the most predominant type of salary structure used by survey participants.
• According to the survey, consulting, professional, scientific and technical services appear to be the heaviest users of market-based ranges. By contrast, health-care and social-assistance organizations were the most frequent users of step structures.

The Rise of Market-Based Salary StructuresThe2002 article reported that75% to80% of surveyed organizations used traditional structures for all employee groups except management, based on data from the2001 “William M. Mercer Policy and Practices Survey.” When comparing today’s results with those from the Mercer survey, a significant downward trend of organizations using traditional structures is apparent, with market-based structures showing the biggest gain in popularity. Market-based salary structures were the most prevalent type of structure used by participants in the recent survey, with64% of organizations responding that they use these structures. Only23% of participants reported using traditional structures.

In addition, the number of surveyed organizations using broadbands appears to have decreased slightly in the past10 years. The2002 survey reported that fewer than15% of respondents had implemented broadbands; today,12% of respondents reported using broadbands. (See Figure1; note multiple selections were possible.)

Figure1: Type of Salary Structure(s) Used for U.S.-Based Employees