After job evaluations and pay survey data are gathered, pay structures can be developed. Pay structures may be created for various types or categories of jobs such as hourly, salaried, technical, sales, and management. The nature, culture, and structure of the organization are considered when determining how many and which pay structures to have.
When establishing a pay structure, organizations use pay grades, which are groupings of individual jobs that have approximately the same value to the organization. Although no set rules govern the establishment of pay grades, 11 to 17 grades are generally used in small and medium-sized companies. Two methods commonly used to establish pay grades are job evaluation data and job market banding.
One approach for determining pay grades uses job evaluation points or other data generated from the traditional job evaluation methods. This process ties pay survey information to job evaluation data by plotting a market line that shows the relationship between job value as determined by job evaluation points and job value as determined by pay survey rates. Market lines are developed by using statistical analysis techniques to calculate the regression equation.
The practice of using fewer pay grades with much broader ranges than in traditional compensation systems is called broadbanding. Combining many grades into these broad bands is designed to encourage horizontal movement and therefore more skill acquisition. The main advantage of broadbanding is that it is more consistent with the flattening of organizational levels and the growing use of jobs that are multidimensional.
