Base Salaries and Internal Equity

The managers always like to compare the salaries of their employees with the market. They believe, the external equity is very important for the success of the organization. Honestly, the internal equity is more important than the external equity of the base salaries.

The internal equity of base salaries is important for employees. The employees are frustrated, when they have the feeling the reward for the performance and job duties is not fair internally among the employees.

HR has to define a good compensation policy, which should bring the internal equity to the organization. The Compensation and Benefits specialists have to make many analyses, they have to bring a good job evaluation methodology and they have to sort out all the job positions in the organization as they can discover the as-is status in the base salaries.

The compensation policy has to reflect the as-is status and it should include the plan to bring the internal equity into the compensation scheme in the organization. The managers should be informed about the results of the analysis and they should understand the HR Action Plan as they can understand the steps taken to balance the base salaries.

The employees are not focused on the external equity of the base salaries, they are sensible to the internal equity and the compensation policy should narrow the differences in the base salaries, which are not easily explainable.