• Organizations distribute compensation based on pay levels and job groupings.
• Pay levels are determined by evaluations of internal and external sources, and job groupings should reflect the organization’s size, salary range, structure, and status.

Some industries have customary pay practices and levels. This may make pay or salary level evaluations easier for some organizations. However, all organizations still benefit from evaluating their pay structures based on information gathered from external sources (how much employees in local equivalent positions are compensated, for example) and internal sources (such as how competitive the organization wishes to be with their pay or salary levels). Other criteria may come into play as well.

Once this information is determined, jobs can be organized into groups — for example, executive, administrative, technical, professional, staff, line supervisors, and so on, depending upon the industry. These may also depend upon such factors as the size of the organization, the difference between the highest salary level and the lowest salary level, and the organizational structure (are there many supervisors or are there very few?). It may also depend on the status of the organization. A new company may have more vigorous promotion approach than an older, more stable company.