How does a company set appropriate salaries for the jobs it has to fill? The conventional answer is that HR managers are supposed to offer “market-based” pay—that is, high enough to attract (or retain) talented people, but not more generous than is necessary to fill those jobs. But that answer doesn’t tell us where “market-based” benchmarks come from. In actual practice, companies typically look at salaries at peer-level companies, to get apples-to-apples alignment with the pay levels that their most direct counterparts are currently offering.