Pay Structure

Pay Structure

After an organization has determined its relative internal job values (i.e., job evaluation
and collected appropriate market survey data through pay surveys, work begins on
developing the organization’s pay structure, including creating pay grades and establishing
pay ranges.

Pay Grades. Pay grades, or job groups, are the way an organization organizes jobs of
similar values. The valuation is a result of the job evaluation process. Jobs, even though
dissimilar in function, of the same or comparatively the same value are paid within the
same pay grade.

No fixed rules apply to creating pay grades; rather, the number of pay grades and their
structure are more of a reflection of organizational structure and philosophy. Issues that
should be considered include the following:

• The size and structure of the organization
• The “distance” between the lowest and the highest job in the organization
• The organization’s pay increase and promotion policy
• The grouping of nonexempt and exempt jobs as well as job families, i.e., clerical,
technical, professional, supervisory, and management jobs
• Creating sufficient grades to permit distinguishing difficulty levels but not so
many that the difference between adjoining grades is insignificant

Well-structured pay grades enable management to develop a well-coordinated pay
system rather than having to create a separate pay range for each job.

Pay Ranges. Pay ranges establish the upper and lower boundaries of each pay grade.
Market data for a benchmark job (ideally, a “key” job that will link to market value)
in each pay range helps to determine the range midpoint. The range spread reflects the
equal dispersion of pay on either side of the midpoint to the lower and upper range
boundary.