Job seeking can be an extensive and confusing process, as there’s so much to consider. There are so many intricacies in the employment world, with pay structures being among the most important. After all, the number one reason anyone gets a job is to earn a living, meaning you need to ensure you’re receiving not only fair compensation but a competitive one. Not only will having a clear understanding of pay structures mean you’ll be able to assess what’s being offered to you more effectively, but you’ll be able to make empowered decisions and negotiate more effectively. Detailed below are some of the key components of pay structures, facilitating your understanding of the world of negotiation.
What is a pay structure?
First things first, it must be established what a pay structure actually is. Essentially, pay structures are the framework that determines how employees are paid. Multiple elements are taken into account here, including the provision of benefits, bonuses, and incentives. With a thorough understanding of each of these elements, the process of evaluating a job offer as a whole becomes a lot more straightforward.
Base salaries act as the foundations for pay structures, and they’re the fixed amount that an employee receives in exchange for their work. This salary is formed on a number of aspects, including the market demand for the role, education, experience level, job responsibilities, and any other employment factors. In order to determine whether a competitive salary is being offered, you should take a look at what other employers are providing for the same role.
Bonuses and Incentives
In addition to the base salary, a number of companies also offer monetary bonuses and incentives. These can come in multiple forms, including stock options, profit-sharing, commissions, and performance-based bonuses. Consequently, employees can be rewarded for helping the company succeed, meeting targets, or achieving certain goals. Each of these contributes to a company’s compensation package, so it’s important to assess how much this affects what’s being offered to you.
Although money is a huge factor in employment, it’s not the sole thing that someone is looking to get from a position. It’s for this reason that employers tend to provide non-monetary perks on top of the base salary and financial incentives and bonuses. These might include professional development opportunities, paid time off, retirement plans, health insurance, and more. Therefore, you should consider your own personal needs and use these to evaluate what perks would be most important to you.
Different Types of Pay Structures
There are various types of pay structures, including the following:
- Salary pay structure – the most commonly applied pay structure and the easiest to understand. Workers receive an annual salary for their work and usually get paid on a monthly basis. The biggest benefit of this type of pay structure is the stability that comes with it.
- Hourly wage pay structure – hospitality and retail tend to make use of an hourly wage pay structure, as employees may be on a zero-hour contract, meaning they’ll work a different number of hours each week. As a result, an hourly wage means employees get paid for the number of hours they work.
- Commission-based pay structure – commission-based pay structures are predominantly used in sales-driven roles. This commission is used as an incentive to drive employees to close deals and make a profit for the company.
- Performance-based pay structure – performance-based pay structures are similar to commission-based pay structures; however, they may require employees to reach very specific targets, and they might apply to entire teams rather than individuals.