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Salary Bands: A Comprehensive Guide
Salary bands provide companies with a structure for salary decisions. They also keep employees motivated, promote pay equity and help with attracting the best talent. In this guide, we offer everything you need to know about them. We hope you enjoy the read.
Salary bands are pay ranges created by an organisation for similar roles.
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.
The benefits of salary bands include pay equity, less bias, transparency, easier budgeting and clear salary outlines for new candidates.
What Is a Salary Band?
A salaryband is a defined pay range designed by an organisation and aligned to a particular role or function. Defining a salary band is based on a multitude of factors: internal budget, market value and internal value.
An example of a salary band set by an organisation: A company may determine that the role of a consultant has a salary band of £45,000 - £75,000.
The purpose of a salary band is to offer fair salaries and wages that enable companies to avoid a talent drain. In some cases, they can also open up opportunities for pay transparency and equity.
How Do Salary Bands Work?
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.
Not all salary bands are created equal, though.
Some companies 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.
A salary band can also be changed over time. For example, if the requirements of the job become more complex or call for higher-level qualifications.
Salary bands allow workers who want to enter the recruitment process to have an idea of what their working conditions will be and the parameters within which their salary will move.
Here you can see an example from UXDesign of what a salary band range could look like (in this case for an Illustrator position):
6 Benefits of Salary Bands
Now that you know how salary bands work, let us take a look at what their advantages are:
1. Fair Pay
Salary bands help to establish a fair and consistent payrange within companies. For example, by identifying which employees are being under or overpaid.
2. Minimal Bias
Bands can help reduce or eliminate unconscious biases. When a salary band is established, the company has a clear scale for setting employee salaries.
3. Talent Attraction
Competitive compensation rates can help to obtain and keep highly qualified candidates to apply for positions at your organisation.
4. Informed Candidates
An established salary band makes it easier to communicate pay ranges to prospective job candidates through job adverts and other means.
5. Streamlined Budgeting
With the help of a salary structure, HR departments can calculate the salary budget for each team, department, new employees, etc. Decisions on new hires are also easier to make.
6. Pay Transparency
Having a salary band system provides more transparency within teams and helps to manage requests for salary increases with better solvency. Which in turn makes employees have more trust in their company.
Why Are Salary Bands Important?
Offering salaries in line with employee expectations encourages productivity, improves the overall working environment and helps boost retention rates, too. A good salary band structure is key in ensuring that the employee's efforts pay off and in reducing staff turnover.
How Do You Create a Salary Band?
Creating a salary band requires extensive research and time. Before you get started, it is important to analyse different aspects, as this can have a positive or negative impact on the perspective of potential candidates who want to join your company.
While it can be tricky, but the process becomes easier if the following steps are considered. The best way to create your own salary band include:
Knowing your market
Studying the competition
Analysing candidates thoroughly
Valuing your employees’ skills
Managing emotional pay
Minding the minimum wage law
Conducting surveys to ensure employee engagement
Ensuring employee satisfaction
1. Know the Market
A thorough analysis of salaries in the sector is essential to establish salary statistics. Conducting market research guarantees that the wages employees receive are comparable to similar positions in the field.
2. Study the Competition
Knowing the competition and what salary bands they use, is just as essential to determining the right salary band for each job group within your company. The aim is to establish salaries that are appropriate to each task in the field.
3. Analyse Each Candidate
If you thoroughly look over the professional profile of each of your employees or candidates for a job offer in your company, it will be much easier to set the salary band.
It should be noted that it is not only important to know how well they perform professionally, but also their skills and competencies, which will be an asset to your workforce.
4. Value the Skills of Your Employees
An employee's salary should be adapted to the professional qualities and skills of each employee, such as their academic background, work experience, positive attitude, etc.
5. Manage Emotional Pay
Compensation for workers does not have to be just monetary. There is an aspect called emotional pay that is equally as important. It represents the level of satisfaction of the employees within the company.
6. Use Minimum Wage as a Guide
To define the salary band, the minimum wage established by law is usually taken as a reference. This makes it much easier to find an average salary for each profile and it also gives an idea of what the employee's expectations are for their position.
7. Conduct Surveys
With employee surveys, you can regularly measure employee satisfaction in your company - and find out whether your employees are content with their salary or would prefer a pay rise.
8. Ensure Employee Satisfaction
Lastly, while salary matters above all else in keeping employees happy, a good salary alone is not enough. There is also an emotional component that influences how well an employee performs and their final choice if they are torn between two job offers.
Aspects such as a healthy work-life balance, training courses, and flexible working hours should not be neglected.
Maintaining Salary Bands with HR Softwares
An HR software like Personio can help you perform the day-to-day tasks simply and efficiently. It has all the essential tools you need so you can save time and focus on what matters: growing your business!
In order to use salary bands for your team, you can check out Personio payroll accounting software, which will certainly help you get your strategic HR initiatives off the ground! Book your free demo today.
Salary Bands: Frequently Asked Questions
How Often Should You Revisit Your Salary Bands?
It is advisable to revisit your salary band at least once or twice per year. This helps you keep up to date with changes in the market.
Should Salary Bands Overlap?
Salary bands overlapping is actually beneficial. More overlap means more cost-effective career advancement; less overlap means higher pay increases for internal promotions.
Why Use Salary Bands?
If some employees are paid more than others, there is bound to be dissatisfaction among your team. Skilled workers may even be compelled to leave the company. With the introduction of salary bands, you are well prepared to avoid such a situation.
We would like to inform you that the contents of our website (including any legal contributions) are for non-binding informational purposes only and does not in any way constitute legal advice. The content of this information cannot and is not intended to replace individual and binding legal advice from e.g. a lawyer that addresses your specific situation. In this respect, all information provided is without guarantee of correctness, completeness and up-to-dateness.
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