This article provides an empirical analysis of wage policy at the firm level. Basedon cluster analysis applied to a sample of medium and large Italian firms and theiremployees, this article classifies the wage policy patterns adopted, provides preliminaryevidence on the dynamics of wage policy at the firm level and outlines the drivers underpinning the identified patterns. The results of the empirical analysesshow that identified wage policy patterns present a mix of hybrid characteristicsrather than alignment with the ideal types of the internal and the external labourmarkets hypothesized in the literature. The wage policy models adopted by sampledfirms display significant dynamic patterns between 1989 and 2004: 28.9 per cent ofthe firms sampled in both years switch to a different wage policy, with an overallincrease of firms providing leading pay rates.