Discuss how the market pay line and the pay policy line are used.
What will be an ideal response?
A market pay line links a company's benchmark jobs on the horizontal axis (internal structure) with market rates paid by competitors (market survey), which are on the vertical axis. A market line may be drawn freehand by connecting the data points or statistical techniques such as regression analysis may be used. Regression generates a straight line that best fits the data by minimizing the variance around the line. Regression provides a statistical summary of the distribution of going rates paid by competitors in the market-in this case, the market pay line. The next major decision is to set the external competitive position by adjusting the market pay line in order to construct a pay policy line. This line reflects the firm's competitive position in the market.
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