Assess & Create Pay Bands

Support organizational strategy with well structured pay bands.

Last Revised: May 4, 2011


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Your Challenge

  • Battling for talent in an increasingly competitive world while balancing labor spend is a challenge for all organizations.
  • Organizations have the opportunity to create balance and maintain their desired competitive position with well-structured pay bands.
  • Pay bands will be slightly different for all organizations, but the manner in which they are constructed and applied is built on a foundation of commonalities.
  • Understand the organizational characteristics that would warrant a pay band system, and if you deem one appropriate for your organization, choose the construction type and application method that will best suit it.

Our Advice

Critical Insight

  • Pay bands apply rigidity and control to a salary structure – adjust the level of flexibility to suit the needs and culture of your organization.
  • Organizations with high or low retention or job offer acceptance, or with an inequitable salary assignment (either real or perceived) need to consider implementing a new pay band structure.
  • The costs and consequences of a poor pay band structure tax the workforce with unnecessary burdens (dissatisfaction with pay) and shave real dollars off the bottom line. 
  • Creating pay bands internally is a manageable task when you have a comprehensive process to follow.

Impact and Result

  • Learn the value of pay bands in supporting organizational strategy.
  • Evaluate and select a best-fit pay band structure to increase the efficiency and effectiveness of the current salary structure.
  • Create pay bands to maximize labor spend.

Contributors

  • Seven in-depth interviews with HR leaders, line of business managers, and executives to learn about their practices and philosophies surrounding pay bands.
  • A ten-question survey to better understand the strategy and uses of pay bands among different organizations. The survey attracted 78 respondents.

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Get to Action

Best Practices Toolkit

  1. Assess pay bands

    Create a structure that supports organizational strategy.

  2. Evaluate different types of pay bands

    Choose a structure that best suits your organization.

  3. Create a pay philosophy

    Make compensation decisions that lead in the right direction.

  4. Calculate the costs of transitioning to a new pay band structure

    Test the feasibility and needed time frame to make a complete transformation.

  5. Update organizational compensation policy

    Reflect the changes that pay bands incur.

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