In a certain company that is designing it's base pay structure, a policy line is drawn to determine the external market value for all benchmark positions of the company. At the same time, they have drawn a simllar line that shows what the internal average salaries are of all the positions in the company. In effect, this results in two parallel lines-- one showing the external market; the other the average rate of pay for all incumbents of all p;ositions in the company. When reviewed,, the internal average salary line is 10% lower than the external market values.

Address the following:

a) What does this discrepancy between these two lines mean from a Human Resource standpoint--- why is it important to understand this information?

b) As an HR professional, what recommendations would you make to your HR manager to potentially correct this potential problem?

In designing a pay grade structure, it is common practice to have the midpoint of each pay grade to be typically a constant percentage greater than the previous grade before it. This percentage normally ranges from 5-10%.

Explain why this practice is a necessary and important practice in the design process, especially how it relates to employee movement and progression through the grades over time.