From time to time some of our clients will feedback to us that they don’t like salary range structure as it keeps them from being able to offer new hires and/or pay existing employees whatever they want to provide them. Thus, there is a tendency to throw out the salary range structure for the reason that it is too restrictive.
We believe salary range structure(s) is an effective compensation management tool and the advantages outweigh the disadvantages for organizations. Below are common pluses for establishing and adopting a formalized salary range structure.
Allows for a starting minimum, market midpoint and maximum pay range for each position based on the internal job value and current external market pay levels.
Provides a communications tool with the employee to speak to their development within the position and how their pay can increase through performance and time.
Creates consistency and defensibility around pay equity, pay adjustments, promotional increases, and other factors influencing pay.
Can slot in new hires and promoted employees into a new position based on what they bring to the position as it relates to experience, education, and skills.
Establishes multi-level career ladders for career-minded employees that desire to progress up through the organization.
Maintains a maximum for each position to avoid overpaying and using those funds to ensure employees in the lower end of their salary ranges are moving up towards market midpoint.