Advantage and Disadvantage of market-pricing

Posted by zonan | Posted in ,

Advantage of market-pricing
-    The primary advantage cited for use of market pricing is that it closely ties organizational pay levels to what is actually occurring in the market, without being distorted by “internal” job evaluation. An additional advantage of market pricing is that it allows an employer to communicate to employees that the compensation system is truly “market linked” rather than sometimes being distorted by internal issues.
Disadvantages of market pricing
-    The foremost disadvantage of market pricing is that it relies on accurate and appropriate market survey data, yet for numerous jobs, pay survey data is limited or may not be gathered in method-ologically sound ways. The scope of market data is another concern. Some employers who are labor market “competitors” may not participate in surveys, and the absence of their data can distort the market values used. Finally, tying pay levels to market data can lead to wide fluctuations based on market conditions.

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