Why do salary bands overlap

Written by Stephan Duncan May 23, Salary bands play three crucial roles: Highlight employees that are being under-compensated or over-compensated in their role. Influence decisions for employers who are hiring new employees and giving raises to existing employees.

Provide transparency so that employees can make a fair salary comparison between themselves and employees in similar roles. Understanding How Salary Bands Work All jobs doing similar level of work are grouped together within a salary range. How to Create Salary Bands There is an 8-step process to create salary bands for your organization. For example, if you are in a competitive environment and require more specialized employees, you may need to compensate more. Conduct job description assessments — Review each job description within your organization to confirm that duties and qualifications align with the job.

Bundle similar roles into families — Take your jobs and group them together into larger job families with similar attributes. For example, group your software and project management jobs under IT and Product, accounting jobs under Finance, and customer success managers and account executives under Sales. Bundling these jobs together will help you visualize similar jobs within a family.

Rank jobs within families — Once your job families are established, evaluate each job based on level and responsibilities and rank them to establish hierarchy. You can rank based off value to the organization, years of experience, or classification of the role.

Perform a salary comparison — Research how your jobs are being paid in comparison to those in similar roles, with similar compensable factors, and similar company types, in similar markets.

Determine employees who are salary outliers — Determine which employees are being paid on the high-end and low-end of their job families. This will alert you to wage disparity between your employees, which can lead to pay inequity, and flight risk.

Mark salary band values — Find the key values in the pay band — the minimum, midpoint, and maximum salary. The level to which pay ranges in adjacent grades in a category overlap.

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Log In. This should be the goal of a typical salary structure. The last example shows substantial overlap. This would occur if there are too many salary grades or too little difference in market rates between salary grades.

Pay equity issues may occur when a substantial range overlap occurs. ERI Economic Research Institute compiles the most robust salary, cost-of-living , compensation terms and executive compensation data available, with current market data for more than 1, industry sectors using the best salary survey data around.

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