SALARY SCALES: DEFINING YOUR ORGANIZATION’S REACH
A company’s salary scale is a reflection of its pay philosophy. A salary scale illustrates an organization’s values in terms of how it positions itself in the market and a demonstration of its internal pay policies – whether career-based or project-based. But more importantly, salary scales can tell us everything we need to know about an organization – from its internal cohesion explicitly differentiating the value they are willing to pay at each job level, to how they approach the symmetry between experience and responsibility.
In addition, organizations use salary scales as a tool to manage staff. Its structure shows the relationships of work from one grade level to the next, variable, or predictable movement within the organization, and expectations around career can be identified.
Types of Salary Structures
The three most common salary structures applied by most organizations is the traditional, broadband, and step pay structure.
- Traditional Structure – typically has multiple grades, each with established salary ranges providing for a well-defined progression path from one job level to the next. Because of its straightforward design, career progression is clearer and easier to communicate because differences between job levels are very distinct and pay and career movement can be done in a controlled manner.
- Broadband Structure – has fewer bands with multiple job levels grouped into each band. Many organizations find this structure to be more flexible where career progression can be done through lateral movement within each band and salary increases can be provided without necessarily warranting a promotion. However, differences between job levels is not as distinct in the broadband design which could be a cause confusion among staff.
- Step Pay Structure – is made up of multiple grades, and each grade has several steps representing scheduled pay increments every year. The step pay structure’s rigid design allows for clear and predictable pay movement within each grade, but is linked to staff tenure/time rather than skills growth.
Tailoring Your Salary Structure to Support Multiple Employment Scenarios
Once an organization has decided on their salary structure type, each grade should now be tailored to illustrate different employment scenarios that can be expected in that organization.
What many do not realize is that there is more to building a salary scale than just simply setting minimum and maximum salaries at each level. There are two other things to keep in mind when designing your salary scale, and that is your Span and your Inter-Grade Differential. To put it simply, the span of your salary scale is the difference between the minimum and the maximum salary of each grade level. This ultimately defines the range of pay for work at any position. Your inter-grade differential, on the other hand, refers to the overlap between one grade level to the next. This allows you to differentiate the level of responsibility between grades. Organizations need to keep in mind that the spans of certain grade levels would depend on the nature of the jobs in that grade. For some jobs, their nature is to progress deeper into their grade resulting to more complex and highly-skilled work, some are expected to advance to the next higher grade, while for others, the nature of their role does not change.
In the case of project-based jobs, it would be logical to apply narrow spans for their grade levels because their roles are not designed to be short-term depending on the project. Career-based jobs, on the other hand, would have wider salary ranges to support growth in skills, moving them deeper into the grade or advancement to the next higher grade over time. Lastly, there is also time-based jobs where their nature does not change justifying a wide salary range but does not allow for much discretion for pay increments or career advancement.
Below are three examples of salary scales showing different employment scenarios, number of grade levels and overlaps between salary ranges:
The salary scale above is an example of a traditional structure with multiple grade levels with each grade mapped to one job level. Salary ranges for each grade is defined showing the value the employer has established for each level of work, and movement from one grade level to the next is clear.
The salary scale above is an example of a broadband structure that has fewer grade levels/bands, but with multiple job levels present in each grade. As staff accumulate more skills and experience, pay increases and progression can be provided through lateral movement within each band without necessitating a promotion.
The salary scale above is an example of a project-based employment scenario which also has grades or bands like the first two structure types above. What makes this structure different is that each grade/band is designed for roles that have short lifespans to reflect the project timing, without the possibility of promotion. A structure like this is only appropriate for project-based organizations with definite term contracts. Project-based structures often have higher minimums reflecting the need for employers to reach experienced talent that can “hit the ground running.” Employers utilizing such a structure should also consider project completion bonuses to improve retention.
A salary scale is essential for any organization. It affects all other areas of HR – from recruitment, to pay management, career development, and promotion. But we recognize that not all organizations have the capacity to design a salary scale. Birches Group has extensive experience in designing salary scales to fit the needs of organizations from different sectors and markets. Contact us to learn more.
Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.