Photo by Rundstedt B. Rovillo
How Much is Education and Experience Worth?
Clients often express a desire to pay for exceptional education and experience and want a policy to support this approach. But the caveat is usually that this wish is only for some, but not all, jobs. What to do?
The answer may depend on whether the organization emphasizes external worth (as measured by the market) or internal worth (as measured by job evaluation).
A market approach relies on the dynamics of the market to determine whether pay should be accelerated or decelerated to keep pace with the value of experience and education. Due to the availability of sophisticated pay databases, an employer may target a market level, e.g., five years of experience, and pay all job incumbents in a similar range, or allow for pay adjustments based on individual measures of education and experience. (The latter would be typical in a highly competitive market.)
But most organizations rely on a combined approach and build a pay structure that reflects external and internal factors, such as job evaluation. When jobs are evaluated internally, required education and experience is typically acknowledged in the system and a new hire is paid a rate that is in part, based on that internal valuation. Pay, from that point forward, is based on a combination of factors related to performance, market, and yes, another year in the job. The point is, most employers who use the combined approach do not examine pay through the lens of education and experience after hire.
However, the truth is, not all jobs need to be treated equally. Employers can determine which jobs need to be paid for exceptional education and experience. It is a matter of determining which jobs fall in a highly volatile or otherwise tight market. Look at your recruitment and exit data and job availability and turnover data by industry (see resources below). Another reason to pay differentially is the difficulty in recruiting to a particular geographic location. Some job skills may be readily available in the areas, others may not. There are, in fact, a number of reasons that constitute a sound basis for policy exception. But whatever the reason, it is important to rely on good documentation of the reasons why the jobs are different, as well as the market data on which decisions are supported.
By the way, two here are excellent sites (free) to explore if you are valuing jobs using the market or job evaluation. You will find detailed job analysis for many jobs as well as market information.
BLS Wages by Area and Occupation
Call me if you have questions or need assistance.
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