How to set salaries

Some ways of thinking about setting salaries:

Market Rate

You pay the lowest price that the market will bear. The bigger the market (the more appropriate candidates that you can reach), the lower the price is likely to be. This is commodity pricing: an average sort of price to attract average (or cheapest possible) candidates.

Market-plus

You pay the market rate plus a bit, fishing for better-than-average candidates or at least that your recruits will work better for you as a result of higher pay.

Market-minus

Sounds silly, but it’s quite common in the world of non-profits. You pay a little below market rate to filter out people who are in it for the money, as opposed to those who value the work itself, share your vision, are committed to the cause.

A living wage

You come at the pricing question the other way round – not “What’s this job worth?” or “What’s the lowest wage I can get away with paying for this work?” but “How do I think members of my team should be able to live?” This could end up being below market, in which case you end up with another values-filter, or above market, in which case you risk looking wasteful or attracting people who want to work for you for the wrong reasons.

I like the idea of starting from a living-wage – and if it looks too generous:
a) It’s a better mistake to make than being stingy
b) You’ve got the interesting problem of helping your recruits to be worth it.

I'd love to hear your thoughts and recommended resources...