How To Establish Salary Ranges

How to Establish Salary Ranges
  1. Step 1: Determine the Organization’s Compensation Philosophy. …
  2. Step 2: Conduct a Job Analysis. …
  3. Step 3: Group into Job Families. …
  4. Step 4: Rank Positions Using a Job Evaluation Method. …
  5. Step 5: Conduct Market Research. …
  6. Step 6: Create Job Grades. …
  7. Step 7: Create a Salary Range Based on Research.

Pay Grades and Ranges

Why are salary ranges important?

There are several reasons why setting salary ranges is important. These include:

What are salary ranges?

The pay structures you use to decide how much to pay an employee for a specific job position are known as salary ranges. There is a minimum and maximum salary for each range for each job. When determining employee pay grades, you may take into account a variety of factors, including:

With room for pay increases, the majority of employees should fall somewhere in the middle of the range. When an employee’s pay reaches the top end of the range, you might want to think about promoting that person.

Senior management positions typically have higher salary ranges than positions with less responsibility. This is due to the fact that you typically hire executives from companies where they previously held similar executive positions. In order to be able to pay these executives competitive salaries given that their decisions will have an impact on the entire company, you must have flexibility in your executive salary range.

How to establish salary ranges

Here are some steps you can take to determine appropriate and competitive salary ranges for each position if you need to develop a salary structure for your business:

1. Compile accurate job descriptions

To find out what each position actually entails, survey the job openings at your company. Additionally, learn what qualifications are required for each job. You can accurately compare positions within your company to comparable positions in the market thanks to this information. You can compare the salaries for those positions to those for positions elsewhere with equivalent job descriptions.

2. Evaluate each job position

Depending on a variety of factors, such as skill level, responsibility, and required experience, some positions within your company will pay more than others. The value you place on a position may also depend on the nature of your business. For instance, if you are hiring staff for a technology company rather than a bank, you might offer an IT position with a higher salary.

You might also evaluate positions based on job type. For instance, an analyst may make more money than an assistant, and an executive position typically pays more than a managerial position. If your business is large and offers a wide range of job positions, this method of evaluation may be beneficial.

3. Survey the job market

4. Determine your position in the job market

You should at least match market salary rates in order to be competitive, if not exceed them. The size of your business and your HR budget will determine how successfully you can compete. Consider whether your budget is sufficient to match current market salaries or if you can pay more than the average rate as you examine market rates for various comparable positions. To stay competitive, you might need to increase your HR budget.

5. Create salary ranges

You can create a pay structure for those positions after evaluating the job positions at your company and matching the salaries for each with the going rate in the market. Traditionally, you achieve this by applying a range of 30% to the midpoint salary for each position. This indicates that the midpoint multiplied by one would represent the position’s maximum salary within the range. 15, with the midpoint multiplied by 0 representing the minimum wage. 85. For instance, if the midpoint salary is $60,000, the highest possible salary is $69,000, and the lowest possible salary is $51,000.

You do not have to use the traditional method. However, depending on your needs and financial situation, it might be a good place to start.

6. Consider pay raise margins

When creating a pay structure, your company’s pay raise margin or compensable leverage should be taken into account. This is the amount, typically a percentage, by which you raise the wages of your employees each year. When an employee is promoted, you should ensure that their pay raise rate is on par with or higher than what an employee in the same position at a comparable company would receive. Offering a competitive pay raise percentage while staying within your budget can help you draw in and keep quality workers.

7. Align your current employees to their new salary ranges

You can now align your employees with the salary ranges that apply to their jobs after establishing ranges for each job position in your business. Each worker should, ideally, be paid around the midpoint of the range for their position. You may want to give an employee a pay increase to bring them up to the market rate if their pay is below the minimum end of the range. You could advance them to the next level, give them a bonus, or provide them with some other form of compensation for workers who are getting close to the top of their salary range.

8. Watch the market

Salaries are frequently impacted by changes in the job market and the economy. When these economic fluctuations result in increases in average salaries, keep an eye on the job market. You want to make sure that your salary ranges increase as market salaries do so that you can continue to be competitive.


How do companies establish salary ranges?

The salary range typically includes a minimum pay rate, a maximum pay rate, and a number of opportunities for pay increases in the middle of the range. The salary range is based on market pay rates, which were established through market pay studies, for individuals performing comparable work in comparable industries in the same geographical area.

How do you find the salary range for a job?

6 ways to find salary ranges for jobs
  1. Look at the job posting. If you’re unsure of the salary range, take a look at the job description first.
  2. Ask the hiring manager. …
  3. Respond to an interview request. …
  4. Ask the recruiter. …
  5. Include a note in your cover letter. …
  6. Perform independent research into the company.

What are common salary ranges?

For example:
  • $40,000 (bottom of the range)
  • $45,000 (median)
  • $50,000 (maximum)
  • Range: $40,000 – $50,000.

How do you create a salary range in Excel?

For example:
  • $40,000 (bottom of the range)
  • $45,000 (median)
  • $50,000 (maximum)
  • Range: $40,000 – $50,000.

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