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5.0 Aligning Company Policy with the Market.

An organisation may wish to shift its salary policy position relative to the market because its policy is mis-aligned with the market, or they may wish to advance, or even retard, their position relative to the market. This process may or may not be concurrent with the implementation of a salary review. First we will consider the case where no performance-based or other salary review consideration is included.

5.0 Aligning Company Policy with the Market.

For the purposes of this determination we assume no change to an individual's performance rating. In other words, their pay level relative to that of a competent performer in their job does not change. This means that their compa-ratio does not change. (Compa-ratio is the measure of a pay level relative to that of a fully competent performer in the job, refer Section 2.0.)

Utilisation of this methodology also presumes that some quantifiable measure of performance in the job is used to determine an individual's level of pay.

First we will consider, by way of example, the case where our sample company wishes to move its practice line to the median of the market.

The company's current practice line formula is:

Salary = Job Points x $130.58c + $17,043

The market's median practice line formula is:

Salary = Job Points x $150.38 + $10,918

The first step is to calculate the proposed new salary for each job, based on the market median formula, and the position's compa-ratio.

For each job in turn this calculation is as follows:

Salary = {Job Points x $150.38 + $10,918} all multiplied by the incumbent's current compa-ratio.

Take for example Job C. For this job, points are 750, current salary is $100,000 and compa-ratio is 87%

The proposed new salary for the incumbent in this position, assuming company practice is aligned with the median of the market, is:

Salary = (750 x $150.38 + $10,918) x 87%

Which equals $107,622

Table 3 shows this calculation for the six company jobs.

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