The Employee Salary and Market Rate Relationship

Salary expectation are usually connected to a variety of employee characteristics. With more experience, unique qualities, and skills, salary expectations increase. In turn, little experience with a lack of required skills will put the candidate in a lower pay bracket. Nevertheless, it is noteworthy that the pay brackets influence not only the staff but the companies as well. Paying over or less than the market rate has both advantages and disadvantages, affecting both parties and never leaving the winning party.

First, when it comes to payment over the market rate, such an approach can improve the retention rate within the company. Increased pay encourages staff to stay with the business (Choi and Joung, 2017). Informing the workers that they will not receive a better income elsewhere by placing the pay bracket above the market rate would probably persuade them to remain with the firm. Furthermore, such increased pay can enhance the output of the employees (Yousef, 2017). When workers believe they are being paid fairly, they are more willing to work harder. Nevertheless, it increases pressure on employees to deliver quality work. Earning an income over the market rate emerges with the bigger obligation to perform well, even while the increase in efficiency is a benefit.

As for the pay lower than the market rate, the first impact is on the company’s expenses. If the company pays less for its employees, it can have a chance to invest the rest into new equipment or explore new market opportunities. On the other hand, with pay less than the market share, employees will not only decrease their productivity but will not demonstrate any loyalty towards the organization (Yao et al., 2019). In this sense, the company will not earn any respect if it does not show that it cares for employees’ needs.

As a result, paying more or less than the going rate has both benefits and drawbacks that affect both parties, but never the winner. Paying over the market rate might first increase output and the company’s retention rate. However, it puts more pressure on workers to produce high-quality work. When it comes to compensation that is below the market rate, the company’s savings become an opportunity. However, if employees are paid less than their market share, they will not show any devotion to the company.

References

Choi, E. K., & Joung, H. W. (2017). Employee job satisfaction and customer-oriented behavior: A study of frontline employees in the foodservice industry. Journal of Human Resources in Hospitality & Tourism, 16(3), 235-251.

Yao, T., Qiu, Q., & Wei, Y. (2019). Retaining hotel employees as internal customers: Effect of organizational commitment on attitudinal and behavioral loyalty of employees. International Journal of Hospitality Management, 76, 1-8.

Yousef, D. A. (2017). Organizational commitment, job satisfaction and attitudes toward organizational change: A study in the local government. International Journal of Public Administration, 40(1), 77-88.

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