13  Wage and salary surveys, wage curve, pay grades, rate ranges, salary matrix, and fixing pay

13.1 Wage and Salary Surveys

Organizations conduct wage and salary surveys to compare their pay structure with industry standards. These surveys help:
- Ensure competitive pay rates.
- Identify market trends in compensation.
- Develop fair and equitable wage policies.

Sources of wage surveys include government reports, industry associations, consulting firms, and online salary databases.

13.2 Pay Grades

  • A pay grade is a step or level within a compensation structure that defines the range of pay for a particular job or group of jobs.
  • Organizations use pay grades to ensure fairness and consistency in salary determination.
  • Jobs with similar responsibilities, skills, and market value are grouped into the same pay grade.

13.3 Rate Ranges

  • A rate range is the minimum and maximum salary assigned to a pay grade.
  • It allows for salary progression within the grade based on experience, performance, or tenure.
  • Common structures include:
    • Minimum (Entry Level Salary)
    • Midpoint (Market Competitive Salary)
    • Maximum (Highest Salary within the Grade)

13.4 Preparing a Salary Matrix

  • A salary matrix (or pay structure) is a table that aligns job levels, pay grades, and rate ranges to ensure systematic salary management.
  • Steps to prepare a salary matrix:
    1. Conduct Job Evaluation – Determine the relative worth of jobs using methods like point factor analysis or ranking.
    2. Analyze Market Data – Benchmark salaries using industry compensation surveys.
    3. Define Pay Grades – Group jobs into pay grades based on responsibility and market value.
    4. Establish Rate Ranges – Set minimum, midpoint, and maximum pay for each grade.
    5. Develop Pay Progression Guidelines – Define how employees move within the range based on performance and tenure.
    6. Ensure Equity and Compliance – Check for internal fairness and legal compliance (e.g., equal pay laws).

13.4.1 Fixing Pay

Organizations determine salaries based on:
- Job Evaluation – Assessing job worth using ranking, point-factor, or classification methods.
- Market Benchmarking – Comparing salaries with industry standards and competitors.
- Internal Equity – Ensuring fairness within the organization’s pay structure.
- Performance-Based Pay – Linking salary increases to employee performance and contributions.
- Government Wage Guidelines – Following legal frameworks for pay structures and increments.

13.4.2 Significant Compensation Issues

  • Wage Disparity – Differences in pay due to gender, experience, or region.
  • Rising Compensation Costs – Increasing costs of salaries and benefits affecting company budgets.
  • Executive Pay vs. Employee Wages – Unbalanced compensation between top management and lower-level employees.
  • Retention and Motivation Challenges – Ensuring fair pay to retain and engage employees.
  • Compliance with Labor Laws – Avoiding legal penalties by adhering to wage laws and benefit regulations.

13.4.3 Compensation as a Retention Strategy

  • Competitive Salaries – Offering industry-standard pay to prevent employee turnover.
  • Incentives & Bonuses – Providing performance-based rewards to motivate employees.
  • Long-Term Benefits – Retirement plans, stock options, and career growth incentives to retain talent.
  • Work-Life Balance Perks – Flexible work arrangements and wellness programs.
  • Recognition & Rewards – Non-monetary compensation like awards, promotions, and development opportunities.

14 Case Study: Development of a Base Pay System at Infosys

14.1 Company Overview

Infosys is a global IT services and consulting firm headquartered in India. With over 300,000 employees, Infosys competes in a highly dynamic and talent-driven industry. To attract and retain top IT professionals, Infosys needed a structured and competitive base pay system aligned with industry standards and internal equity.

14.2 Problem Statement

Infosys faced the following challenges in its base pay system:
1. Inconsistent Pay Structure – Disparities in salary levels existed across different job roles and locations.
2. Lack of Market Alignment – Compensation was not aligned with industry benchmarks, leading to talent attrition.
3. Unclear Career Progression – Employees lacked clarity on salary growth and promotion criteria.
4. Retention Issues – Competitors were offering better salary packages, attracting Infosys’s top talent.

14.3 Objective

Infosys aimed to develop a structured base pay system to:
- Ensure internal equity and consistency in pay.
- Align salaries with market rates to remain competitive.
- Provide a clear career and pay progression framework for employees.
- Strengthen employee retention by offering a transparent and fair pay structure.

14.4 Approach & Implementation

14.4.1 Step 1: Conducting Job Evaluation

Infosys adopted the Point Factor Method to evaluate job roles based on:
- Skills and Competencies Required
- Experience and Education Levels
- Complexity and Scope of Work
- Decision-Making Authority

Each job role was assigned a score, which helped categorize them into Pay Grades.

14.4.2 Step 2: Market Benchmarking

Infosys collaborated with Mercer and Aon Hewitt, two leading HR consulting firms, to:
- Conduct salary benchmarking surveys.
- Compare Infosys’s salaries with top competitors like TCS, Wipro, Accenture, and IBM.
- Identify gaps in compensation to make necessary adjustments.

14.4.3 Step 3: Defining Pay Grades & Pay Ranges

Based on job evaluation and market research, Infosys created:
- 10 Pay Grades covering entry-level to senior management.
- Pay Ranges for each grade, with a minimum, midpoint, and maximum salary.
- Employees with high performance and experience were placed near the upper range.

Example of Pay Structure (illustrative):

Pay Grade Job Level Min (₹ LPA) Mid (₹ LPA) Max (₹ LPA)
PG1 Associate 3.5 4.2 5.0
PG2 Senior Associate 5.5 6.5 8.0
PG3 Lead Consultant 9.0 11.0 13.5
PG4 Senior Manager 14.0 17.5 22.0

14.4.4 Step 4: Developing a Salary Matrix

A salary matrix was designed to integrate:
- Performance-Based Increments – High performers received 10-15% hikes.
- Experience-Based Progression – Employees moving to senior roles had predefined salary growth.
- Skill-Based Pay – Extra compensation for certifications in AI, Cloud Computing, and Cybersecurity.

14.4.5 Step 5: Pay Transparency & Communication

Infosys launched an internal HR portal where employees could:
- View their pay range and growth potential.
- Understand promotion and pay hike criteria.
- Access market pay comparisons for transparency.

14.4.6 Step 6: Compliance & Fair Pay Audits

  • Infosys conducted annual pay audits to ensure gender pay parity and fair wage distribution.
  • Adjustments were made to correct pay disparities between male and female employees.
  • Compliance with Indian labor laws and International Equal Pay Standards was ensured.

14.5 Outcome & Impact

After implementing the new base pay system, Infosys saw significant improvements:

✅ Employee Retention Improved by 20% – Fewer resignations due to salary dissatisfaction.
✅ Internal Equity Strengthened – Pay disparities between similar roles were minimized.
✅ Market Competitiveness Enhanced – Infosys salaries became 10-15% more competitive compared to industry standards.
✅ Performance-Linked Pay Motivated Employees – High performers received better incentives and growth opportunities.
✅ Compliance with Labor Laws Ensured – Fair pay practices were reinforced.

14.6 Key Learnings

  • Job Evaluation and Market Benchmarking are Crucial – Without market research, pay structures can be uncompetitive.
  • Transparency Builds Trust – Employees value clear salary progression plans.
  • Performance-Based Pay Retains Talent – Recognizing and rewarding top talent reduces attrition.
  • Fair Pay Audits Prevent Legal Issues – Regular audits ensure non-discriminatory pay practices.