Establishing pay rates involves three stages: job evaluation

(to ensure internal equity), conducting wage/

salary surveys (to ensure external equity), and combining job evaluation and salary survey results to determine pay rates. Job evaluation is aimed at determining the relative worth of jobs within a firm. It compares jobs with one another based on their content, which is usually defined in terms of compensable factors, such as skill, effort, responsibility, and working conditions.

Jobs of approximately equal value are combined into pay grades for pay purposes. Salary surveys collect data from other employers in the marketplace who are competing for employees in similar kinds of positions.

The wage curve shows the average market wage for each pay grade (or job). It illustrates what the average wage for each grade should be and whether any present wages or salaries are out of line. LO.1