Certified Human Resource Professional (CHRP) Practice Exam

Which of the following is true of compensation market pricing?

1. Market pricing addresses internal equity

2. Market pricing links pay to company strategy

3. Market pricing is not suitable for unique jobs

4. Market pricing reduces the gender pay gap

The correct answer is: Market pricing is not suitable for unique jobs

Market pricing is primarily concerned with aligning organizational compensation structures with prevailing market rates for similar jobs in the industry. This approach emphasizes how external market conditions influence pay rather than focusing solely on factors internal to the organization, such as job evaluations. The option that states market pricing is not suitable for unique jobs is true because market pricing relies on established salary data to set compensation levels. If a job is highly specialized or unique, there may be insufficient data to draw from, making it challenging to apply market pricing effectively. Consequently, organizations may need to use alternative compensation strategies, such as internal equity assessments or customized compensation structures, to ensure that employees in unique roles are adequately compensated, reflecting the specific skills and expertise required. Other choices emphasize aspects that may not accurately represent the nature of market pricing. For instance, market pricing does not directly address internal equity, as it focuses more on external competitiveness. Additionally, while market pricing can align compensation with company strategy, it primarily serves to match industry compensation standards, rather than linking directly to individual company strategies. Finally, while market pricing can play a role in addressing pay gaps, it does not inherently reduce the gender pay gap without accompanying measures to ensure equity and fairness in compensation practices.