How to Establish Salary Ranges for Your Company?

February 14, 20203:04 pm4232 views
How to Establish Salary Ranges for Your Company?
How to Establish Salary Ranges Within Your Workforce?

In a more competitive talent market, it is very vital for employers to know what job seekers want and are looking for in order to hire the best ones. Based on Ceridian survey, The Optimal Recruiting Experience, salary is listed as the most common reason (40 percent) for exploring new opportunities, and this feeling is shared by both younger and older workers. Following the list are job location, work-life balance, and growth opportunities.

That being said, if employers want to stay competitive and attract the best ones, it is important to establish salary ranges within your company. 

Why should you develop a salary range? 

There is much salary range information on the internet, can’t HR just rely on it? 

There is no shortage of salary information for both employees and employers over the internet. Platforms like Payscale, Glassdoor,, and Indeed provide updated salary from anonymous employee’s data. Yet, it might not be reliable for employers to use the information. 

Payscale research on Comp is More Than Data revealed that many smaller, fast-growing organisations often rely on external salary data to develop their wage. This, nevertheless, is actually one of the biggest misconceptions. The truth is that paying people the right way involves more than getting market data and lining up employees’ salary to the market. Moreover, having a solid salary structure developed within your workforce help ensure and manage your salary expenditure. It can also help retain your current employees as well as make your recruiting, hiring, and promoting efforts more focused and easier to execute. 

See also: Starting Salary Outlook for Fresh Grads in Asia

How to establish salary ranges? 

The key to establishing salary ranges is that HR leaders and CFOs must work together with the realisation that pay scale is a key driver of company’s success. Here are a few tips from Payscale to start the move of creating salary ranges within your workforce. 

Getting information, market value, and relevant data 

First step is to gain information to know how much your competitor usually pay their employees. Using a platform like Glassdoor, Payscale, or can give you a little insight on the ranges you should pay. Rest assured, anyone applying to your company is checking the salary intel that others post online. The information also helps you compare apples-to-apples when you are in this phase. 

Creating pay ranges 

Once you have salary market data, you can start to develop your salary ranges. The ranges should contain a minimum, a midpoint, and a maximum pay you will give to your employees. 

  • Midpoint range

In this step, start with determining your midpoint range for each of your positions. You will use the range midpoint to determine the width of the range. In this step, do not take market data as face value and automatically adhere to the market for your ranges. You should focus on the essential function of the role and the key skills needed to be successful in the role. Consider these questions: 

  1. How critical is this particular role to your organisation? 
  2. What are your organisational profile and company stage? 
  3. What can you afford? 
  4. How much would you like to spend on base pay vs. other areas of your total rewards package? 
  • Width range 

When you know the midpoint on how much you will pay a certain role in your company, you should consider having width ranges. Commonly, the wider the range, the most opportunity there is for employees to move up in salary. In this phase, you should consider having wider ranges for higher-level positions with an expectation that employees will have more longevity or differentiation of skills or performance.

  • Guideline for role movement 

Once you have the ranges, you should develop guidelines for different situations, including: 

  1. Where new employees enter ranges 
  2. How quickly current employees move within ranges
  3. What happens when an employee is promoted
  4. How much discretion managers have to move someone through the range 
Use metrics to stay consistent 

To manage employee pay through a range, be familiar with a couple of metrics, such as compo-ratio and range penetration. These are indicators of how employees are performing relative to the ranges. The metrics help you understand if you are rewarding people appropriately for their behaviours and help you identify underpaid and overpaid employees. 

Communicate everything with executives 

Lastly, talk with executives about your salary ranges. You should also discuss the links between compensation, retention, engagement and performance to achieve needed results. Give the executives information about data sources you are using to inform pay ranges. After that, discuss with them how much you want to be transparent with the salary ranges.  

Read also: HR Tips for Easy Payroll Process in Every Season

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