Salary Structure & Grade Pay

Creating Equitable Salary Structures

 Grades & Pay Structure
• GPS provides framework for managing pay.

• Widely used as part of non-financial rewards.

• The usual outcome of a formal job evaluation

program is a new or revised grade structure,
which together with market rate intelligence
provides the basis for designing and managing
pay structures.
 Salary Structures
• Pay for jobs according to prevailing pay levels and
preferred position (lead, lag, match) in the market
• Establish pay ranges for each job with a minimum,
maximum, and midpoint to the range.
• Use control points (maximum and midpoint) to
control payroll expenses
• Create pay grades to more simply classify jobs
according to similar worth
 Market Pay Line

60000
50000
40000
30000
Y

20000
10000
0
400 500 600 700 800
Points
MGMT 4030 - Managing Employee
Reward Systems
MGMT 4030 - Managing Employee
Reward Systems
MGMT 4030 - Managing Employee
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MGMT 4030 - Managing Employee
Reward Systems
MGMT 4030 - Managing Employee
Reward Systems
MGMT 4030 - Managing Employee
Reward Systems
MGMT 4030 - Managing Employee
Reward Systems
MGMT 4030 - Managing Employee
Reward Systems
MGMT 4030 - Managing Employee
Reward Systems
MGMT 4030 - Managing Employee
Reward Systems
MGMT 4030 - Managing Employee
Reward Systems
MGMT 4030 - Managing Employee
Reward Systems
MGMT 4030 - Managing Employee
Reward Systems
MGMT 4030 - Managing Employee
Reward Systems
 $$
Maximum

Midpoint

Minimum
Salary Pay Grade
 Salary Structures

• Minimum
– Provides flexibility to hire new employees who
need training and experience.
– Employee paid more as competency is certified
through performance reviews.
 Salary Structure: Control Points
• Midpoint of Range
– Ties the pay range to the market pay line
– Must be fully competent on job
• Maximum of Range
– Caps the salary
– Only exceptional cases may receive more pay
– Normal way to earn more is with a promotion.
 Pay Grade Range (Spread)

• Function of amount of discretion or range of

performance in the grade
• 20-25% for lower level jobs
• 30-40% for clerical, technical
• 40-50% for professional, middle mgmt
• 50+% for senior mgmt and executive
– Or might be set to 25th and 75th percentiles in
salary survey
– Range above and below midpoint may be
different
 Pay Grade Dimensions

• Midpoint to Midpoint Difference

– Represents pay differential from one pay grade
to the next one in a sequence
– Must be meaningful amount
– Ranges from 8% (non-exempts) to 12%
(management and exempts)
 Pay Grade Dimensions
• Pay Grade Overlap
– Provides flexibility to promote
employees without an overly generous
pay raise.
– Too much overlap leads to pay inequity,
– Too little overlap causes barriers to
promotion and inefficiencies
 Compa-Ratio

• Average of all actual salaries in a pay grade

divided by the midpoint of the range
• Used to monitor distribution of salaries and
identify grades that are out of control
– CR = 1.00 is the ideal (for market match policy)
– CR > 1.10 is quite high
– CR < .90 is quite low