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Grade & Pay Structure
The aims of compensation management and pay
 Attract
 Retain
 Motivate staff
There are two types of leading pay structures
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Internal equity method (using Job Evaluation)
Market pricing (using Salary Surveys)

Pay structures provide a framework for managing pay
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Pay structures, also known as salary structures, set out the
different levels of pay for jobs, or groups of jobs (Pay Grades), by reference to:
o
o
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Their relative internal value as determined by job evaluation,
External relativities as established by market rate surveys
Except in the case of “Spot Rates”, provides scope for pay progression in accordance
with performance, skill, competence, contribution or service
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They enable the organization to
determine where jobs should be placed in a hierarchy, define pay levels and the scope for
pay progression, and provide the basis upon which relativities can be managed, equal
pay achieved and the processes of monitoring and controlling the implementation of pay
policies can take place
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-Grade Structures A grade structure consists of a sequence or hierarchy of grades, bands or levels in to
which groups of jobs that are broadly comparable in size are placed
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A Pay Structure is a collection of pay rates or pay ranges, sometimes known as Salary
Structures
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Pay structures are defined by the number of
grades they contain and, especially in narrow-or broad-graded structures, the span or
width of the pay ranges attached to each grade
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Pay structures provide a framework for valuing jobs and understanding how they relate
tooters within the organization and to the external labor market
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 Maintain internal pay relationships among jobs
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Structure setting and adjustment provides a systematic way to manage pay structures
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Wage levels should be in line with the prevailing conditions in the labor market
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Be able to identify differences in capability and contribution
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Simple salary levels should be maintained
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level of literacy
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A series of steps or levels within a pay grade,
usually based on seniority and corrections from line
charges
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Rationale for Payment
Structures Grades and Payment Structures are required to provide the following
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Types of Pay structures
Narrow Graded Pay structures (Traditional)
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It allows for high levels of clarity in
a hierarchical grading system
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However, because the grades are very narrow, most employees reach the top of the pay
range for their pay grade fairly quickly potentially leading to demands for upgrading and
grade drift (jobs being ranked more highly than justified)
 Most typical type in the public sector
 Jobs of similar value are slotted
 The most generally accepted pay range for professional and managerial positions is
plus or minus 20 per cent from the midpoint
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 Broad banding -The clustering of numerous individual pays grades into a few broad
pay bands
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From Narrow Grade to Broad Banded Pay Structure
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Pay is managed more flexibly
Band widths are much greater
Not many bands in the structure (5 to 6)
Boundaries defined by job evaluation
Roles placed on bands by a combination of job evaluation and market rate
analysis
Identifies generic roles as benchmarks
More scope for „career development pays‟
Lesser emphasis on promotions
Lateral moves encouraged as a developmental measure

The Aims of Broad banded Pay Structures
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To achieve more flexibility in pay management
To fit the pay structure to a de-layered organization
Emphasis on horizontal processes
Create a strong relationship between pay and contribution
De-emphasize the status based nature of rewards
People rewarded for lateral development

Job Family Pay Structures
Within a job family / segment structure, each job family has its own grade and
pay structure
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In a job family / segment structure, level or hierarchical structures may
vary to reflect the special features of the terrain
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In a job family structure, each job family would have its own grade and pay structures
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Job Family Structures

Level 1
Level 1
Level 1
Level 2

Level 1

Level 2

Level 2

Level 3

Level 2
Level 3

Level 3

Level 3

This approach may be helpful where there is strong competition for certain occupations
such as IT staff, as it can facilitate the payment of higher salary levels for particularly
occupational groups
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These take the form of long grading structures based on a series of incremental
points, which usually allow for service-related pay progression
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 Consists of a series of incremental points extending from the lowest to the highest
paid jobs
 A pay spine increment may be standardized at, say, 3% from top to the bottom
 Progression of the spine is based on service in the post, usually at one increment
per year
 If performance related pay is introduced, individuals can be given accelerated
increments
 Jobs may be placed at fixed points on the spine
 Ranges for different job grades may also be superimposed on it
 Being replaced with broad banding or family structure
 Simply define a separate pay range for each job
 Rates for jobs and relativities between them are governed by market rates
 Relativities determined by job evaluation

Spot Rates/Individual Pay rates
Some organizations, especially smaller ones, do not have a formal graded structure and
rely entirely on „spot rates‟, i
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the rates for jobs do not define any scope for the
progression of base pay in the form of a pay range or salary bracket, although bonuses
may be provided on top of the base rate
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In a nut shell, there is only one job to a grade
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Spot salaries often also occur to senior positions, such as senior managers or

directors, where the remuneration package need to be designed to attract or retain a
specific individual
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Simply define a separate pay range for each job
Rates for jobs and relativities between them are governed by market rates
Market driven
Relativities determined by job evaluation

Selecting a Structure
Understanding the organization
Before selecting any new type of pay structure or modifying an existing structure, you
must have a clear understanding of the organization, its people and the current pay
arrangements
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