Understanding Internal Equity and External Competitiveness in Compensation: How Do They Impact Salaries?

Hi Seniors,

I need your help to work on my assignment to examine the following. Can seniors explain how the following factors determine salary and wages:

1. Internal equity
2. External competitiveness

What exactly are these terms in compensation, and how can these terms be determined to address problem areas?

Kind regards,
Rashid.

Hi,

It seems nobody is practicing Market Salary Survey in India. But if I ask for a consultant, many will appear on board projecting themselves as experts in conducting salary surveys but could not answer the term I asked for, which belongs to Market Salary Survey. Can anybody explain?

Regards,
Rashid

Hi Rashid,

As per my understanding, Internal Parity refers to similar pay for similar work. External competitiveness, on the other hand, pertains to how competitive or fair the salaries being paid to our employees are for similar work in either our competitors or other organizations.

Thanks

Hi Rashid,
Don't worry I have answer for you.
1. Internal equityis a fairness criterion that implies an employer's pay practices correspond to each job's relative value in the organization.

2. External equityis a measure of an employer's compensation levels compared to those employers within its recruiting market. As a fairness criterion, external equity implies that the employer compensates at levels that correspond to prevailing, external market rates, as determined by the job's market range. External equity must be balanced with internal equity.

I hope this will solve your qery.

Regards

Sawant