• 71 percent of surveyed companies reported having formal base salary range structures.

• 77 percent of companies with formal base salary range structures, review their structures annually.

• 94 percent use market data when designing salary structures.

• 78 percent use traditional salary structures and 11 percent use broadband structures.

• 55 percent have multiple structures varying by job and/or geographic location.

• Salary range spreads and midpoint-to-midpoint differentials vary significantly by job level.

Salary Ranges and Structures Defined
A salary range is the span between the minimum and maximum base salary an organization will pay for a specific job or group of jobs.

A salary range structure (or salary structure) is a hierarchal group of jobs and salary ranges within an organization. Salary structures are often expressed as pay grades or job grades that reflect the value of a job in the external market and/or the internal value to an organization.

Frequency of Salary Range Structure Review
Salary range structures should be reviewed regularly to maintain a competitive edge in attracting and retaining top talent. Most companies with formal base salary range structures review their ranges and structures annually (Table 2). Seventeen percent of companies review salary structures every two or three years.

Fourteen percent of participants with formal salary range structures reported that they do not use salary structures with executives.

Fewer than two percent of companies reported Other/Varies. Companies choosing “other” indicated that the frequency for reviewing structures varies by type of job, business unit, location, or union status. Examples include:

• Some companies with union employees review salary structures based on the length of multi-year labor contracts and review other non-union jobs annually.

• Some companies in very competitive job markets review salary structures for critical jobs
  semi-annually.

Methods Used to Design Salary Range Structures
The two most common methods companies use to design base salary structure ranges are market pricing using external market data and point-factor focusing on internal pay equity.

Most companies use a market-pricing approach with current salary survey data for individual jobs, to design and adjust salary range structures (Figure 1). Only four percent of companies rely solely on the point-factor method, which assigns a point value to specific jobs within a company.

Twenty-four percent of companies blend market-based and point-factor approaches when designing their salary range structures.

Traditional vs. Broadband Salary Structures
Traditional salary structures are organized with numerous layers and range structures (or pay grades) with a relatively small distance between each range. Traditional structures provide a hierarchal system enabling employees to be promoted from one pay grade to another. When designed correctly, traditional structures enable the recognition of differing rates of pay for performance and guarantee a reasonable level of control over internal compression and salary expenditures.

Broadband salary structures are more flexible and consolidate pay grades into fewer structures with wider salary ranges. Broadband structures tend to be used by relatively flat organizations with fewer levels and smaller companies without a dedicated compensation staff to establish traditional structures.

On average, 78 percent of companies use traditional salary structures, while only 11 percent use broadband structures (Figure 2). Nine percent utilize a hybrid or mix of traditional and broadband structures.

Two percent of companies reported Other/Varies. Companies choosing “other” indicated that the types of structures used varies by type of job, business unit, location, or union status.

Single vs. Multiple Salary Structures
Fifty-five percent of companies with salary range structures have multiple structures varying by job and/or geographic location (Table 3).

As companies increase in size, they typically have a higher number of salary structures to accommodate more locations and job structures. Companies with more than 500 employees are more likely to have multiple locations and use different salary structures varying by geographic location than companies with fewer than 500 employees.

There is a strong correlation between job level and number of salary structures. Single salary structures are more common for executives and multiple salary structures are more common for lower-level positions. For example, 58 percent of companies have single structures for executives and 63 percent of companies have multiple salary structures for hourly and non-exempt employees.