Lately when doing market benchmarking I’ve sometimes heard the comment “I can get an X (Accountant/ Project Manager, etc) for less than the market package benchmarks you are showing me here”. It’s worth commenting on this.
The statement is of course true: there are always individuals whose services can be obtained for less than the “going rate”. The reasons are almost endless, and include:
· Those who are unemployed and urgently seeking employment;
· Those who are unaware of their true market worth;
· Those who are attracted by the reputation/image of the company or its proximity to their home;
· Those who are relatively independent financially and do not need a high package from their employer; etc.
However the purpose of market benchmarking is to establish the middle of the market (and the spread on either side of this midpoint) to obtain the most balanced view of an individual’s package relative to market.
In effect organisations need to pay their employees the packages for which those employees are prepared to work; this is a separate issue from market benchmarking. And often this “deal” (the accord struck between employer and employee regarding the package for which the employee is prepared to offer their services) works, sometimes for a long time. Just remember that eventually people do come to understand their true market worth and can end up leaving for greener pastures.
In essence it’s a risk management issue: the more you pay someone below their market worth, the more you are exposing yourself to the risk of the employee leaving for package reasons. Assessment of the degree of risk of losing specific individuals is key to this whole risk management process: some people create a bigger void on leaving the company than others.