Salary bands: A comprehensive guide

A salary band is a defined pay range designed by an organisation that outlines the minimum and maximum paid for a specific role or type of work. Salary bands are decided based on internal budget, market value, and internal value. 

For example, an organisation may decide that the role of a consultant has a salary band of £45,000 - £75,000. Anyone working at that level or in that role within the business should be paid a salary within this range.

The purpose of a salary band is to offer fair salaries and wages that enable companies to avoid a talent drain. Publishing salary bands also increases pay transparency and promotes pay equity.

A salary band groups related positions into one ‘band’ which has established criteria on how employees can move from a lower level to a higher one. Salary bands are not simply a matter of pay: they also provide employees with opportunities for career progression.

Some organisations set their pay ranges above or below the average. Regions with a lower cost of living generally offer jobs at the lower end of the expected pay range. The highest salaries tend to be earned in urban areas where the cost of living is high. Businesses that want to attract and retain top talent are more likely to pay above average and offer generous pay bands.

Salary bands and pay transparency also play an important role in the recruitment process. Businesses that publish a salary give candidates a greater insight into what to expect. Publishing salary ranges is also a legal requirement for some organisations, including EU businesses and UK businesses with 100+ employees in EU member states.

Here's an example of salary bands in action. This table shows sample salary bands for illustrator positions at a design agency, covering different levels of seniority:

By offering salary bands, hiring managers at the agency can tailor job offers and compensation to the candidate within the ranges shown — giving them more flexibility to attract the best talent.

Download: Our best practice guide to salary bands

This easy-to-use best practice guide helps set you up for success by understanding the critical role of salary bands, learning the best practices for setting salary bands, and creating your own salary bands with a helpful template and process.

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Salary bands offer benefits for employers, candidates, and existing employees — including fairer pay, reduced bias, greater pay transparency, and clear structures for growth.

The main benefits include:

1. Fair pay: Salary bands help to establish a fair and consistent pay range within the business, including identifying which employees are being under or overpaid and taking action to prevent this. 

2. Minimal bias: Bands can help reduce or eliminate unconscious biases. When a salary band is established, the organisation has a clear scale for setting employee salaries.  

3. Talent attraction: Competitive compensation rates can attract and retain highly qualified employees. 

4. Informed candidates: An established salary band makes it easier to communicate pay ranges to prospective candidates through job adverts and the interview process.

5. Streamlined budgeting: HR departments can calculate the salary budget for each team and inform managers on what it'll cost to hire a new team member.

6. Pay transparency: A a salary band system provides more transparency within teams and helps to manage requests for salary increases fairly.

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Offering salaries in line with employee expectations encourages productivity, improves the overall working environment, and helps boost retention rates. A good salary band structure is key in ensuring that the employee's efforts pay off and in reducing staff turnover. 

The process for introducing salary bands includes understanding the market, analysing skills and job roles, and setting clear definitions for the monetary value of a role.

Analyse salaries in the sector so you can understand current market rates for the roles within your organisation. Salary benchmarking is a crucial step if you want to present job opportunities that are competitive.

Review what other organisations in your sector offer in terms of salary and combined compensation. It's wise to offer a salary range in line with expectations — too low and you risk losing candidates to the competition, too high and you'll burn through your compensation budgets faster.

Set a clear job description for each role, and group jobs into levels based on similarities in terms of the type of work, seniority, or responsibilities. It's easier to set salary bands by group for similar roles, rather than create a unique band for every single role.

Decide the minimum, midpoint, and maximum for every salary band based on your market and competitive research. The minimum should be the default entry point for a new starter with the required experience. The midpoint represents the suggested pay for an experienced worker in that role. The maximum is the upper limit that you're willing to pay based on skills and experience.

Salary bands should be clear and transparent, but they don't have to remain at the same level forever. Commit to regular reviews and increases based on inflation, market rates, the cost of living, and organisational goals and values.

Salary bands support pay transparency by removing secrecy around pay and benefits, and replacing it with standardised pay bands for similar roles or levels. Employees can easily understand the minimum and maximum salary for their role, where their current salary ranks, and what the growth opportunities are.

For organisations impacted by the EU Pay Transparency Directive, salary bands and progression frameworks must be based on objective criteria, and the pay range must be available to candidates before the interview stage.

Adopting fair salary bands and increasing pay transparency helps you meet regulatory requirements and contributes to reducing gender pay gaps across the organisation.

A traditional human resources information system (HRIS) holds employee data and offers basic analysis and reporting, but for salary banding and pay equity you’ll need an HR system that includes compensation management.

Some HR platforms offer compensation management as an optional feature — including Personio. There are also standalone compensation management tools that integrate with your HRIS, like Figures, Coverflex, Pave, and Ravio.

Personio's compensation management feature includes:

• Compensation review cycles with tracking and approvals

• One-time and recurring compensation management

• Salary bands

• Performance ratings and compa-ratios

• Ability to handle multi-currency scenarios

• Guidelines for managers on how to make fairer compensation decisions

• Instant reward letters

• Automatic salary updates to employee profiles and preliminary payroll records

• A single interface for salaries across teams

• Easy stakeholder access with secure access controls

Fair and easy compensation management

Make fairer decisions with visible performance data, salary bands, and built-in guidelines.

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Salary bands and pay bands refer to the same thing, while a pay scale is slightly different. Salary bands (and pay bands) have a defined salary range for a specific role or level, while a pay scale typically features different levels that employees reach based on how long they’ve been employed or completing specific progression milestones.

Salary bands are not currently mandatory for UK employers, but this may change in the future as legislation around pay transparency and equity develops. Consultations around whether or not organisations should be required to publish salary information before the interview stage are ongoing.

HR software with built-in compensation management features (like Personio) can help you introduce, standardise, and maintain salary bands. There are also dedicated HR software tools for compensation management, pay equity, and salary benchmarking.

If an employee reaches the top of their salary band, what happens next depends on your company policy and approach to compensation. Most organisations freeze base pay increases and rely on other methods of reward, like performance bonuses, promotions, and non-cash incentives like sabbaticals or extended time off.