The fact that salaries in the 60-80k range come to mind in discussing compensation suggests that your company does not attract good talent and so the discussion

The fact that salaries in the 60-80k range come to mind in discussing compensation suggests that your company does not attract good talent and so the discussion of top of market doesn't apply to you. The reason is that, in 2012, 80k is a fair starting salary for a developer fresh out of a good college with no experience. It is not the top of a range for people with experience unless the company is third rate, pulling from the discards that couldn't find work at a decent firm. (Two year old article on starting salaries for college grads: http://www.networkworld.com/news/2010/022210-computer-science.html http://www.networkworld.com/news/2010/022210-computer-scienc...) As far as the situation goes with being able to tell whether someone is in the top 10% or so, that's pretty easy since bottom 90% can't code at all and fail at fizz buzz. Slightly more tricky is separating the top 1% that are really good from that top 10% who can develop and design at all. Distinguishing these two levels of competency is easily and accurately accomplished by an interviewer who is a competent developer himself. And yes, it is much better to pay the top rate for the small number of developers that are competent and efficient rather than pay a few percent less than that for people who can contribute little to a project, which is unfortunately the case for most of the talent pool.