Pay Factors Complete Guide - What Are Pay Factors in 2020

What are the pay factors behind pay decisions? What goes into determining how much money you should pay your employees? We found that variables such as educational background, working tenure, certifications, management experience, job competency, and business environment are related to the pay factors affecting salary adjustments.

Every organization has its own compensation philosophy – how it wants to position itself in the market regarding pay, the companies that it considers its competitors, the talent that it considers critical, and so on. The pay factors that you should consider are as follows:

1. Degree

According to multiple surveys, people with a master's, doctorate, or professional degree earn more and have more flexible pay factors during their careers than those with less education. Those with a bachelor's degree earned about $2.27 million over their lifetime, compared to $2.67 million for those with a master's, $3.25 million for those with a doctorate, and $3.65 million for those with a professional degree. In other words, the level of education that students pursue can ultimately have a huge impact on their lifetime earnings and pay factors.

In addition to level of degree, choice of major affects pay factors. On average, people with a bachelor's degree in management or STEM earn more than people with advanced degrees at any level working in education, sales, and community service.

2. Years of experience

Out of the mix, years of experience is a very important pay factor. Even for the same job, the salary of a recent graduate would not be equal to that of a person who has a longer tenure. In fact, management positions often require a certain number of years of experience. Generally speaking, positions higher up on a job hierarchy require more years of experience.

3. Certifications

Some certifications and memberships in certain professional organizations are also crucial pay factors. These factors can demonstrate particular skills and experiences that can be important in a given role. In fact, in many industries, employees are required to have corresponding certifications.

4. Management experience

In general, the more employees you manage or more managerial experience you have, the higher your position and salary will be. Being able to oversee the work of multiple employees is a large responsibility and typically leads to a higher salary.

5. Job competency

Even in similar positions, if employees have different skills or competencies, the value of their contribution to the company is also different. Most employers evaluate a candidate's worth based on his or her previous work. Once in the company, management decides whether to give the employee a raise based on an assessment of the individual's performance.

Either way, job performance and job competency will always be a pay factor.

6. Business conditions

The business condition of a company is the most direct pay factor affecting the salary level. Obviously, in good business conditions, companies can afford to maintain an increase in salaries, while companies with poor business conditions are not afforded the same luxury.

7. Company pay policies

Corporate pay policies can also be a pay factor. Pay policy refers to profit accumulation and distribution of compensation. Ultimately, companies can focus their profits on employee retention and attraction, business development, or a multitude of other areas. Businesses that focus on employee retention and attraction will be more prone to paying higher salaries.

8. Corporate brand or reputation

Organizations with better reputations may be able to attract the right talent even at the lower end of the salary range. Similarly, an organization that's not as highly regarded in the market may not be able to attract the right talent even on the higher end of salary ranges.

These are some of the pay factors that have an impact on your salary benchmarking. If you want to get a fair third-party salary analysis for the payfactors, you are welcome to visit Salary.com.