What Are the Causes of Salary Variances?

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Gender may play a role in salary variations.
Gender may play a role in salary variations. (Image: Jupiterimages/Goodshoot/Getty Images)

Employers often post advertisements for positions where the annual salary varies between two levels. Salary variances result in people working the exact same position for a different rate of pay. This does not only occur during hiring, throughout the employee's career, his salary is higher or lower than that of his co-workers and counterparts.

Qualifications

Upon hiring, the employee's qualifications are the key determinant in her salary. If the employer is seeking an employee with five years of management experience, a bachelor's degree in business administration and two years of sales experience and she has all of those qualifications, she will earn closer to the higher end of the scale. On the other hand, if she has only two years of management experience, but she has the other qualifications, she may fall lower on the scale.

Performance

Employers conduct performance reviews to evaluate employees throughout the course of their tenure. The book "Research Methods for Organizational Studies" by Donald P. Schwab discusses how these reviews impact an employee's pay. Schwab uses statistical modeling and provides employees a performance rank between one and seven. Using this rank, combined with a numerical rank for other factors, such as experience and job title, he calculates salary variances. His findings indicate that performance is a significant factor in salary variance; employees with higher performance rankings earned higher salaries.

Cost of Living

The location of the organization also plays a role on earnings, because the cost of living varies across locations. Organizations often have multiple locations, and the same position may pay a significantly smaller salary in its Texas offices than it pays in its New York offices due to the differences in cost of living.

Working Conditions

Working conditions also impact earnings. According to Salary.com, hazardous working conditions or unfavorable work shifts usually lead to higher pay. For example, the factory manager working near hazardous materials may earn a premium, while the overnight shift manager may earn higher pay than the day manager.

Considerations

Many positions are performance based. A publication by the United States Bureau of Labor Statistics reveals the various industries, such as sales, service occupations, professional and technical services and transportation and material moving occupations, that may receive commissions, bonuses and other performance-based compensation. These variations in compensation are difficult to measure, because they vary by the individual and they are based on the employee's performance, the demand for the product or service and the state of the economy. In the public sector, salary variations are accounted for and considered. Salary is on a scale where each pay grade is attached to certain qualifications and a certain job title.

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