As most of us know or realize salary grades are convenient structuring mechanisms for sorting positions and associated compensation. They can be easily defined, and should be used to ensure people are fairly compensated for their contributions to the firm.
The minimum attributes for a grade structure are:
- Naming convention (often just numerical)
- Salary minimum
- Salary mid-point
- Salary maximum.
They can be determined by formula and often have rules associated with the amount of overlap between the maximum of one grade and the minimum of the succeeding grade as well as the differential amount between successive grade mid-points. The key element is the assigning of positions to salary grades. Often the process begins with developing a grade structure and then assigning of positions.
A more precise and certainly more defensible process is to evaluate positions and then design a grade structure that is based on the value of positions within each grade. This is the method we have designed into DBCompensation™. Our process illustrated below allows our users to:
1. Determine the position ratings
2. Define an appropriate grade structure easily and quickly
3. Analyze the results for compliance, equity and compensation planning decision input.
Assignment of salary grades without a foundation of clear job evaluations heightens the tendency for the results to be interpreted as highly judgmental. Their value must lie in being seen as the outcome of a fair and transparent process which improves communication and understanding.
Salary grades are in reality just another frame of reference for characterizing the relative value of a position to the firm. They have the extra value of widespread usage and perceived understanding for communication. Having the ability to easily design and validate grade structures in DBCompensation is a clear advantage for our hybrid core compensation planning and administration automated methodology.
Next we will examine our improved sore-thumbing capabilities.