What factors should I consider when determining where to place a new hire within the pay range?

There are several factors, monetary and nonmonetary, to consider when determining the base pay for someone you want to hire. The key is to create an offer that meets the business strategy and the individual’s expectations, while complying with all applicable laws.

Business strategy

The decision-maker should consider such business-related factors as:

• Organization’s compensation philosophy: Do my company’s industry, business objectives and location demand the premium rate for this job?
• Departmental budget: Does the budget allow for any flexibility in the offer?
• Internal equity: What are other employees in this same job, same department or at the same job level being paid?
• Market price/external influences: Is this job difficult to fill or is it hard to find qualified candidates in this location or industry?
• Candidate’s level of experience: How many years of relevant experience does this person have?
• Candidate’s education and certification levels: Does this person have degrees and/or professional certifications that will benefit the employer?
• Geographic differential: Is the job located in an area that has a higher cost of living or demands higher salaries?

Individual’s expectation

As to the individual’s expectations, considerations should include:

• Base pay expectation: Is the person’s base pay expectation in alignment with the offer and if not, are there enough other incentives?
• Variable or incentive compensation: What type of pay for performance system or additional compensation is given periodically?
• Benefits package: What is the level of coverage and the cost to an employee for medical, dental, vision, prescription drug, flexible spending accounts, 401(k) (match and vesting schedule), other retirement accounts, employee assistance program, disability, life and accidental death and dismemberment insurance?
• Work/life balance: How much paid leave (e.g., vacation, sick) would accrue?
• Development opportunities: What is the tuition reimbursement policy? Does the company support professional certifications, attendance at professional conferences and seminars?
• Commute: How would the commute between home and work be impacted? Are flexible work schedules and telecommuting options?
  

Legally defensible?

Any job offer must comply with all applicable federal and state laws, including:

• Title VII, which bars discrimination in employment on the basis of race, color, gender, religion and national origin.
• The Pregnancy Discrimination Act, which amended Title VII to include pregnant women.
• The Equal Pay Act, which amended the Fair Labor Standards Act to prohibit employers from taking gender into account when compensating men and women performing work requiring equal skill, effort and responsibility.
• The Lily Ledbetter Fair Pay Act, which amended Title VII to clarify when unlawful employment acts were considered to be made in terms of pay.
• The Americans with Disabilities Act, as amended, which protects qualified individuals with disabilities.
• The Age Discrimination in Employment Act, which prohibits age-based discrimination against applicants and employees over 40.
• State nondiscrimination laws, which vary from state to state and may be broader than federal laws.
• State and local laws barring salary history inquiries, which prohibit employers from requesting or using the applicant's current or former salary or other compensation information (variable pay, equity, etc.) when determining pay.