Pay Structures / Salary Structures
What are Pay Structures or Salary Structures?
Pay structures, also known as salary structures, set out the different levels of pay for jobs, or groups of jobs, by reference to:
- their relative internal value, as established by job evaluation
- external relativities, via market rate surveys
- where appropriate, negotiated rates for the job
What are the main characteristics of Pay Structures?
- indicate rates of pay for different jobs
- provide scope for pay progression via performance, competence, contribution, skill or service
- contain pay ranges for jobs grouped into grades, individual jobs or job families.
Why do organisations need Pay structures?
- establish a logically-designed framework within which equitable, fair and consistent reward policies can be implemented
- determine levels of pay for jobs and people
- basis for the effective management of relativities
- help monitor and control the implementation of pay practices
- communicate the pay opportunities available to employees.
The most important types of pay structure, or salary structure, are:
Graded structures – a sequence of overlapping job grades into which jobs of broadly equivalent size are allocated. Each grade has a range, the maximum of which is usually 20 to 50% above the minimum.
Broadband – similar to conventional graded structures, but with far fewer and far wider bands. The maximum of the band can be 100% or more above the minimum.
Job Family Structures – Each job family has a different graded structure. Jobs are allocated to a job family based on activities carried out; skills and competencies e.g. Information Technology is a perfect example of a job family for which there is usually a separate grade structure.
There are many other types of pay structures and salary structures e.g. pay spines, benefit structures, spot rates, fixed rate, time rate. All of these pay structures will be looked at in more detail in the next chapter.
