The value of the person
Individuals are valued by organizations for four reasons:
1) the contribution they make to organizational success
2) their skills and competences
3) the experience they bring to their roles
4) their potential. People also have their own value in the marketplace – their ‘market worth’ – which has to be taken into account by employers in setting their rates of pay.
Financial circumstances of the organization
‘Affordability’ is an important concept in reward management. Pay systems must not cost more than the organization can afford, and this will influence the level of pay that can be offered to employees.