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Previous research has revealed wide variations in pay for the same job, even within a single locality. To date, however, the sources of such pay differentials are not well understood. The present research investigates how compensation managers from a wide variety of organizations combine infonnation about current job pay rates, market rates, and job evaluation points to arrive at new pay rates for jobs. In addition, it examines the role of two pay strategy variables (pay leadership position and external versus internal orientation) in job pay decisions, controlling for differences in organizational demographic characteristics (e.g., size, industry). Results suggest that pay strategies affect assigned pay levels, with higher pay being assigned by managers from fmns with market-leading strategies and internal pay orientations. In addition, pay strategies appear to influence the relative weights attached to market survey versus job evaluation infonnation in pay-setting for jobs. Specifically, although market survey information consistently explained more variance in assigned pay than did job evaluation, this effect was more pronounced among managers from finns having an external orientation. Organizational demographics also affected assigned pay levels, but to a lesser extent than pay strategies.


Suggested Citation
Weber, C. L., & Rynes, S. L. (1989). Effects of compensation strategy on job pay decisions (CAHRS Working Paper #89-06). Ithaca, NY: Cornell University, School of Industrial and Labor Relations, Center for Advanced Human Resource Studies.