I saw the benefits of pay structures first hand from the start of my career, I just didn’t know it. My first two years in the working world were spent at CA Technologies (a fortune 500 software company) in the Marketing Rotation Program. CA had pay structures and band levels built out, and gave all employees access to a system where we could look up where we fell in our band to visualize our career progression. As a young professional with buoyant professional dreams, seeing this career path kept me engaged in a way that I couldn’t recognize at the time.
My marketing rotation program colleagues were the same way. Every time we got together for a big team meeting we would discuss our life after the program and how we could move up within CA. With a goal in sight and a system showing us how to get there, we all finished out the program and excelled in each of our rotations. We were the first rotation program to graduate the entire incoming class – and a lot of this can be attributed to our level of engagement and our understanding of our employer’s compensation practices.
Now, pay structures are created for a variety of reasons beyond facilitating employee engagement. New laws are always being established, companies always want to control their costs and internal spending, and they always want to attract the best possible talent to their organization. But the best candidates want to know that their career can progress inside your company. They don’t just want a job that they can do for a few years and then figure out their next move later. Pay structures help highlight career paths at your company for both employees and candidates.
Here are the main drivers behind why companies might create pay structures:
Changing External Laws
– rules and regulations regarding pay are always changing at both the federal and state level. When these laws change, HR needs to be informed so you can adjust your compensation practices accordingly. If a new law goes into effect or something changes from past legislation, you need to ensure you’re complying. Creating pay structures organizes your salaries in an effective way so that when new laws take effect, you can react quickly.
Regulating Costs and Internal Spending
The biggest element on a company’s balance sheet is payroll. And creating structures sets the bar for internal pay measurement. Structures help regulate merit increases and determine if they’re appropriate (depending on the level of the job in the organization). Pay structures also help to determine the worth and impact of certain key positions to the company and identify employees who may be a flight risk. In the end, pay structures help you allocate your increase budgets the right way.
Attracting New Talent
A structure in place gives you a way to easily create salary ranges for a new position using accurate data. You can hire people in the lower half of the range to give them room to grow within the job, or hire someone at the top of the range that could get promoted soon. Either way, structures set your recruiting process up for success before it even starts.
Highlighting Career Paths
Structures let both internal employees and external candidates visualize a career path at your company. When employees can see what it takes to get them to the next pay grade, they’re more likely to be engaged in their work. On the other hand, when a prospective hire can see how they can advance their career within the organization, they have one less reason to say no to your offer.