How does the Company decide Your Salary?

Salary may not be the most important factor, but it has consistently been the top 5 factors that employees are looking for. Since it is so important, do you know how does the company decide your salary? And by knowing how the company decides your salary, it also helps you to understand what to do to increase your salary.

Same Job, Same Pay vs Competency based

Most companies decide an employee’s salary based on the job scope, duties and responsibilities. These companies generally follow a same job, same pay philosophy although there may be variances in different employees’ salary who are doing the same job. This is to cater to differences in the individual’s qualification, experience and competencies. However, generally, all jobs of the same job grade will fall under the same salary range. Therefore, in order for you to have a jump in your salary, you need to move to a higher level job. Otherwise, the increment may be only marginal.

On the other hand, some employees may be paid mainly based on their competencies. This may happen when the job has unique duties and responsibilities within the company or the industry. The competencies required for the job are in high demand or not commonly found in the labor market. For such jobs, the increment of salary is usually based on acquiring additional skills or knowledge.

There are also companies adopting a mixed approach to employees’ compensation. While there is a fixed job and compensation structure, the companies also take into consideration the individual’s competencies and the potential for leadership succession.

What About Qualification and Experience?

Contrary to popular belief, qualification and experience are not the main factors to receiving high salary. They are most of the time requirements to qualify for the job interview.

In fact, the only way to increase your salary is to increase your value by expanding your knowledge and upgrading your skills. But don’t mistake your qualification as knowledge and years of doing the same job as skills.