Why are jobs paid differently? by Colin Evans

This is a question that is seldom asked and probably because it seems that the answer is obvious. However it is worth exploring in a bit more detail, as it helps to illustrate the different pay principles used by organisations when setting salary levels.

Another way of asking the question would be “Why aren’t all jobs paid the same?” and this can be explained in a number of different ways:

1. Jobs come in different sizes
All organisations pay more for bigger jobs to some extent. Using a job evaluation methodology to establish job size, market data demonstrates that bigger jobs are typically paid more.

2. Jobs of the same size come in different types
Although jobs may be of the same size, they can be in different functions that pay differently in the market, for example treasury jobs in finance tend to be paid more than operations jobs in production.

3. Jobs of the same size and type are found in different sectors
The most obvious difference in salaries between sectors can be seen by looking at the public and private sectors. However beyond this difference, different sectors within public or private can pay differently for the same jobs. As an example, HR jobs in the retail sector would be paid differently to the same jobs in the oil and gas sector.

4. Organisations have different beliefs about market competitiveness
Whilst many organisations set pay levels around market median, some believe that they need to pay more to get the best and some believe that their employee value proposition is so powerful that they do not need to pay so much.

5. Different incumbents bring different skills and experience to the role
Many organisations operate a salary range to allow incumbents to be paid differently for the same role based on their skills, experience and expected level of performance in the role. This also allows organisations to be flexible when seeking to match/better the existing salaries of new hires. This practice is much less common in the public sector where salary differences in the range are often service based.

In summary though, these differences are based on a few basics concepts:
• having a pay principle of reflecting market differences based on job size, job function or market sector
• having a pay principle of how competitive salary levels need to be in relation to the external market
• having a pay principle of paying more for higher performance (or longer service) in the same role.