Written by Stephan Duncan
May 23, 2019
Salary bands, also known as pay bands, are pay ranges given to groupings of roles. Salary bands’ pay ranges are influenced by geography, cost of living, seniority, and experience. Salary bands play three crucial roles:
Learn why it’s important to fully understand how salary bands work in your organization’s salary structure, and how the process can help employees visualize their pay within the overall salary structure.
All jobs doing similar level of work are grouped together within a salary range. The employees in those jobs are all in a salary band. Then, the next more senior group of employees doing a similar level of work are grouped together within a salary range. These employees are in a different salary band. And so on.
Note that salary bands can overlap. For example, mid-level marketing positions within a software company might include an email marketer, product marketer, and lead generation marketer. Those jobs are then grouped together into a particular band and given a predetermined salary range. Within the pay range, the prices for these jobs could be between $49,000 and $71,000.
As those mid-level marketers become director-level, their job responsibilities will increase, along with their pay band. For instance, if Pay Band 3 pays between $49,000 and $71,000, then Pay Band 4 may be between $59,000 and $82,000.
It is important to recognize that when an employee is promoted and moves up from one band to the next, because of the overlap between bands, they aren’t always in a position to receive an increase in salary. However, their salary potential will increase since their new band has a higher maximum point.
Your organization should leverage multiple sources of market data to help determine salary differences between adjacent grades. You should consider using a mix of survey data, HR-aggregate market data, and occasionally self-reported employee data. The more data sources, the more reflective of the market salary bands may be.
After your salary bands are built, be sure to frequently monitor the market to keep your bands’ ranges current. If there are any significant changes in external job prices, update your ranges so your compensation practices can continue to positively impact employee engagement and talent retention.
There is an 8-step process to create salary bands for your organization. However, the process is easy to follow, and once in place, pay within your organization will have increased transparency, and you’ll be able to better explain decisions surrounding pay increases or promotions:
The table below is a mock salary band plan within a company:
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