salary structure
What is a Salary Structure?
A Salary Structure is a system where jobs of roughly equal value or worth are grouped into grades with competitive salary ranges. Compensation decisions made solely to pacify employees inevitably produce higher operating costs and create an environment that rewards complaints rather than performance. Individualized compensation arrangements rarely go unnoticed by other employees, despite the company’s best efforts at secrecy, and usually cause some rancor within the employee group.
Why establish a structure?
By establishing compensation guidelines based on current market norms before recruiting for a position, employers can balance: “How much must we pay for this desirable candidate?” and “How much should we pay to staff this position?” Even though they may be responsible for managing costs, most managers strive to provide their employees with the highest possible compensation because they don’t suffer directly from the increased cost and they benefit from being the “nice guys”. When individual managers make decisions regarding subordinate compensation, every unit is likely to receive dissimilar pay for similar tasks.
It is important to establish a structure because it provides:
• Organizational consistency
• Reference for career development and predicting pay increases
How do you develop a Salary Structure?
Through
– Compensable Factors
– Pay Ranges
Compensable Factors Definition: Any job attribute that provides a basis for determining the worth of the job.
Compensable Factors
Employee-based examples:
Job-based examples:
Their use requires decisions regarding:
• weights
• degrees or levels
Pay Range
The minimum to the maximum base rate of pay for employees in the same or similar job
• Often expressed pay grades
A Salary Structure is a system where jobs of roughly equal value or worth are grouped into grades with competitive salary ranges. Compensation decisions made solely to pacify employees inevitably produce higher operating costs and create an environment that rewards complaints rather than performance. Individualized compensation arrangements rarely go unnoticed by other employees, despite the company’s best efforts at secrecy, and usually cause some rancor within the employee group.
Why establish a structure?
By establishing compensation guidelines based on current market norms before recruiting for a position, employers can balance: “How much must we pay for this desirable candidate?” and “How much should we pay to staff this position?” Even though they may be responsible for managing costs, most managers strive to provide their employees with the highest possible compensation because they don’t suffer directly from the increased cost and they benefit from being the “nice guys”. When individual managers make decisions regarding subordinate compensation, every unit is likely to receive dissimilar pay for similar tasks.
It is important to establish a structure because it provides:
• Organizational consistency
• Reference for career development and predicting pay increases
How do you develop a Salary Structure?
Through
– Compensable Factors
– Pay Ranges
Compensable Factors Definition: Any job attribute that provides a basis for determining the worth of the job.
Compensable Factors
Employee-based examples:
- Education/training
- Experience
- Certification/licenses
Job-based examples:
- Customer relations/service
- Communications/ key interactions/ level of contact
- Supervisory responsibility
- Supervision received
- Job Complexity
- Problem solving
- Decision making (authority and impact)
- Working conditions
- Responsibility for assets
Their use requires decisions regarding:
• weights
• degrees or levels
Pay Range
The minimum to the maximum base rate of pay for employees in the same or similar job
• Often expressed pay grades