Salary Bands Template

Create salary bands for every role in your organisation

Intro

• Ensure pay is fair and there is pay equity across the organisation.
• Demonstrate to employees what their earning potential will look like as the grow within your organisation.

A typical salary structure will have the following components

1. Job Family - are very similar to teams and relates to the specific type of work or skillset (’Talent Acquisition, Human Resources, L&D etc’), while Departments are broader (’HR’)
2. Levels - How senior / experienced the role is. As seniority increases, so does the level of responsibility and consequently the salary. Levels are sometimes referred to as ‘grades’.
3. Salary bands - these represent the minimum, middle and maximum pay rate for a given level and how salaries grow within a level.

Why are salary bands useful?

Salary bands support you in making fair and equitable compensation adjustments.

• A salary band is a great way of giving an employee an idea of their earning potential within a level as they grow. As they pick up new responsibilities and increase their impact, they can being rewarded accordingly. Think of it as an objective way to move people through a level.
• This compensation clarity will also help motivate employees to set development goals in order to grow within their level.
• For more senior roles, it’s likely that employees will spend a lot of time within one level, so giving them clarity on where they sit within that level is critical, so they don’t feel like they are stagnating.

• Salary bands help ensure that employees at the same level are being paid within the same range.
• In addition to this, by having a minimum and maximum rate for every job, and then placing employees into this range by selecting a sub-level, you can easily explain to employees why one is earning way more than the other despite having the same role and level.

• Having a clear pay structure that all roles are aligned to allows for accurate financial planning for future roles and salary raises.

• Salary bands are extremely useful when it comes to hiring.
• You can put a salary band on a job advert. I’m not going to go into why this is the right thing to do, but let my friends at Otta do the talking here.
• Giving you some flexibility on where to pay a new hire as you can objectively place them in the range, and not necessarily always at the bottom. For example they could be moving internally within the organisation and not start at the min point.

• Identifying where a report sits in their role, helps managers determine how best to manage them, allowing for greater personalisation in management. Read more about the management styles to take and task-relevant maturity here.

In order to build salary bands you’ll need two things

1. Reliable and relevant market data. This could come from various sources such as:
• ‘Give to get’ salary benchmarking providers like Radford, Figures, Pave, Mercer, Ravio, Figures
• Job boards
• Local recruitment surveys
• Your recruitment team who speak to candidates every day

2. A ‘common language’, consisting of the elements listed below. These elements are also collectively referred to as the ‘organisational infrastructure’, ‘job architecture’ or ‘hierarchy of jobs’.
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Job Families

• The job families you map to and create will vary depending on the data sources you choose to use. For example each salary benchmarking provider will have a description for each job family that you can read and then decided which one matches your role most accurately.
• Job Families ensure you can identify the compensation data that most closely matches the job or team you are looking for, therefore giving you a more accurate data.
• The Job Family relates to the specific type of work or skillset (’Talent Acquisition, Human Resources, L&D etc’), while Departments are broader (’HR’)

1. You can group by departments should you wish, however…
2. “If you use Departments you’re essentially comparing apples to apples regardless of whether it’s an eating apple or a cooking apple; when using Job Families you’re comparing Granny Smith apples to Granny Smith apples.”

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Tracks

• The most common structure among scaling tech companies is a two-track structure as shown in the diagram below.
• You either take a track managing people or becoming a specialist managing projects and processes.
• Separate tracks for ICs and people managers allows employees to develop according to their interests and skillsets and ensures people are working where they will be most effective.
• Typically both tracks are valued equally, so the same base salary is used at each level, regardless of whether someone is on the IC or People Manager track in the same department. If this isn’t the case in our organisation then it’s not a problem.

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Levels

• Levels define how senior / experienced the role is.
• Job levelling criteria is used to define the overall ‘profile’ and ‘size’ of every role and level in the organisation. This is sometimes referred to ‘scope’, ‘responsibility’ and ‘influence’ depending on the levelling framework you are using.
• Choosing your levelling framework - Each salary benchmarking provider has their own levelling framework. You can view some of the most popular ones here.

5 simple models to help build your salary bands

I have lots of data

I don’t have much data

Executive model

Why use these models?

Salary band terminology

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Midpoint differential

• This is the difference between the midpoints of each adjacent level i.e. the % jump in salary from one level to another.
• Formula:
• (Midpoint of level above - Midpoint of level below) / Midpoint of level below

• Typically, lower-level jobs tend to have a smaller midpoint differential as the progression from one level to another is quicker. The differential increases for higher-level positions, but this does depend on the market data being used.

Level	Typical midpoint progression
Support position	10%-15%
Professional, Managerial	15%-25%
Executive	20%-35%

• Using pure market data for the midpoint, may well result in inconsistent midpoint differentials. These uneven midpoint differences happen unintentionally over time and very common when you use data submitted and aggregated from 1,000’s of companies.

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Pay range spread aka band widths

• The pay range spread aka ‘band width’, represents the the difference between the min and max salaries in a level.
• You do not need to calculate the spread, as this is something that you determine yourself for each level. Simply set the % to determine the width from the min to the max of a level.

• Defining the width of your band is very important as it determines the growth opportunities for your employees within that level.

• Broadly speaking the range from Level 1-8 should represent a lifetime of progression in that particular job family.
• Levels 1-3 (narrower bands)
• Pay range spreads of: 15%-30% for lower levels.
• Typically your bands will be narrow in the lower levels where progression through a level is quick.
• Smaller range spreads can benefit lower level positions where the market rates are closer. If the range spread is too large it becomes harder to ensure the internal progression of entry hires to the next level, unless your making salary increases of 8-10% on a regular basis.
• Levels 4-8 (wider bands)
• Pay range spreads of: 30-40% for mid/snr levels.
• Pay range spreads of: 40-50% for execs.
• More senior roles will have wider bands, where time spent in a level becomes longer. Role responsibilities skills and expectations and therefore take longer to master and excel in. That being said, if the band is too wide, people may start to stagnate within that level as it takes too long to progress through it.

FAQs