Unit VIII Leading, Meeting and Lagging the market

UNIT VIII
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Leading, Meeting and Lagging the market
Leading, meeting and lagging the market are HR philosophies each with its risks and benefits. Leading is when a firm pays its employees higher salaries than the market averages. This is very important especially if the firm wants to attract and retain top talent, increases the number of people seeking a job with the firm, discourages unionization efforts, increases productivity, performance, and morale and decreases employee turnoverCITATION Sco18 \l 1033 (Society for Human Resource Management, 2018). Alternatively, it may prompt the other firms to increase the compensation rates for their employees. Additionally, since it is very expensive to run a payroll, the firms may compete to attract and retain talent till their profit margins are adversely affected. Eventually, all compensation levels go up, and it is important for a firm to ensure it is careful not to lead the market at the expense of profitability. This HR philosophy is best in highly competitive labor markets, and every firm should be careful to ensure it enjoys its benefits and mostly avoid its downside.
Meeting the market is when a firm pays its employees the industry average. Since the firm compensates its employees at the market rates, it can manage to attract and retain top talents. The firm is also not overwhelmed by the payroll expenses as they are just about the industry average though in some cases, the firm might find itself in a position of playing catch up to retain its top talentCITATION Sco18 \l 1033 (Society for Human Resource Management, 2018). Playing catch up is attempting to retain talent by giving counter offers more than industry average to its employees to avoid high employee turnover. Market leaders often cause the market to gradually increase their compensation rates, especially in highly competitive labor markets.
Market laggin...