A pay structure is a collection of pay grades, levels, or bands linking related jobs within a hierarchy or series. It provides a framework to implement reward strategies and policies.
Pay structures are usually designed to:
- Align the reward strategy with an employer’s mission, vision, purpose, culture, and business strategy by encouraging required behaviours and performance.
- Bring order and clarity in managing pay rises and career development.
- Help ensure they are within current legislation and are fair thus ensuring an equal pay system and avoiding claims or discrimination.
The span of each grade is calculated using the difference between the minimum and maximum salary within the range.
‘Differentials’ refer to the percentage difference in pay between the mid-point of one grade and the mid-point of the next grade. The span of this differential needs to be enough to reward staff taking on more responsibility.
The CIPD Reward Management Survey informs us that 60% of employers, who responded, were using a pay structure.
Pay progression is how staff increase their pay within a set pay grade and this is often regarded as the measure of ‘real’ wage growth. It is distinct from salary increases that are linked to either inflation or promotion to a higher band.
Organisations use pay progression to:
- Encourage and reward defined employee behaviours.
- Maintain pay competitiveness while controlling wage costs.
- Provide a fair and transparent process to determine individual salary increases.
Progression is usually determined by the:
- Span of each pay band – the degree of width within each band.
- Number of pay grades within the overall pay structure.
It is not unusual to have an overlap between the top level of one pay grade and the lower levels of the grade directly above it. This recognises the value and contribution from a highly experienced employee at the top of their grade in comparison to a newly appointed employee on a learning curve at the lower end of the grade above.
Taking account of the process required after the job evaluation is completed the differential between the lowest and highest employees, the new grading structure within JRS was produced using these templates. This grading structure would place the current job roles within six different Job Families ranging from one to six. We have shown this in the attached document1. As you will see from this document, this job family reflects the salary range and seniority of the roles within each band.
Introducing a structured salary framework will enable JRS to reward performance and employ new employees on one of the subsections within the band that their particular job is placed.
Without pay progression in place employees may raise complaints or grievances if new, or inexperienced employees are placed on the same salary. It may also result in experienced employees feeling undervalued if they don’t receive the recognition for loyalty or their experience in the role.
By introducing incremental steps for pay progression it can help eliminate any issues and if a new employee is highly experienced or would be a good fit for the organisation, they too can be placed on any of the incremental points within the appropriate grade for the role.
Having a pay structure in place allows the organisation to evaluate any new role or re-evaluate an existing role that has changed and place it at the correct pay band using job evaluation.
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