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November 2010
Salary structures are an important
component of effective compensation programs and help ensure
that pay levels for groups of jobs are both externally
competitive and internally equitable. A well-designed salary
structure allows management to reward performance and the
development of skills, while controlling overall base salary
cost by providing a cap on the range paid for particular jobs or
locations. The following article highlights results from the
2010 Culpepper Salary Range Structure Practices Survey.
Key Survey Findings
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72 percent of surveyed companies
reported having formal base salary range structures.
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Most companies with formal base salary
structures review their structures annually.
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93 percent use
compensation survey market data when designing salary structures.
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82 percent use traditional salary structures and 7 percent
use broadband structures.
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55 percent
have multiple
structures varying by job and/or geographic location.
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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.
Percent of Companies with Formal Salary Range Structures
Seventy-two percent of surveyed companies reported having formal
salary range structures
(Table 1). As companies increase in size they are more
likely to have salary range structures. Less than half of
companies with fewer than 100 employees use salary range
structures. In contrast, about four out of five companies with
more than 500 employees use salary range structures.
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Table 1:
Companies with Salary Range Structures |
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|
Percent of Companies |
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All Companies |
72% |
|
Number Employees |
|
|
1 to 100 |
44% |
|
101 to 500 |
64% |
|
501 to 2,500 |
78% |
|
2,501 to 10,000 |
86% |
|
Over 10,000 |
85% |
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Source: 2010-2011 Culpepper Salary Budget & Planning Survey
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Frequency Salary
Range Structures are Reviewed
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).
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Table 2:
Frequency Range Salary Range Structures are Reviewed by Job Level |
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|
Percent of
Companies |
|
Annually |
Every Two Years |
Every Three Years |
Other / Varies |
No Formal Ranges for
Job Level |
|
Executives |
60% |
8% |
5% |
8% |
19% |
|
Non-Executives |
77% |
9% |
7% |
6% |
1% |
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Non-Executives include: Directors & Managers,
Professionals, and Hourly & Non-Exempt |
Nineteen percent of participants with formal
salary range structures reported that they do not use formal salary
structures with executives.
Companies choosing "Other/Varies" indicated that the frequency for
reviewing structures varies by type of job, business unit,
location, or union status. Examples include:
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Some companies with union employees review
salary structures based on the length of
multi-year labor
contracts and review other non-union jobs annually.
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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 three percent of companies rely
solely on the point-factor method, which assigns a point value
to specific jobs within a company.
Nineteen 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.
On average,
82 percent of companies use traditional salary
structures, while only seven percent use broadband structures
(Figure 2). Nine percent utilize a hybrid or mix of traditional
and broadband structures.
Single vs. Multiple Salary Structures
Fifty percent of companies with salary range structures have multiple structures varying by job and/or geographic location. 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
non-executive positions (Table 3).
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Table 3:
Single vs. Multiple Salary Structures (by Job Level) |
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Job Level |
Percent of
Companies |
Single
Structure |
Multiple Structures
Differing
by
Job
Function |
Multiple Structures
Differing
by
Geographic Location |
Multiple Structures
Differing
by
Job and Geography |
Other / Varies |
No Formal Structures |
|
Executives |
52%
|
12%
|
8%
|
7%
|
2%
|
19%
|
|
Directors / Managers |
47%
|
18%
|
19%
|
13%
|
1%
|
2%
|
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Professional |
44%
|
19%
|
20%
|
15%
|
1%
|
1%
|
|
Hourly /
Non-Exempt |
43%
|
17%
|
24%
|
14%
|
1%
|
1%
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As companies increase in size, they typically have a higher number of salary structures to accommodate more locations and job structures.
Additional Data Tables
In addition to the data tables and figures above, we provide a more comprehensive
report
with additional breakouts and data tables including:
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Salary Range Spreads
for Traditional Structures by Job Level
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Salary Range Midpoint-to-Midpoint
Differentials for Traditional Structures by Job Level
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Salary Range Overlaps
for Traditional Structures by Job Level
Availability of Comprehensive Salary Range Structure
Practices Report
as Downloadable PDF
Data Source: 2010 Culpepper
Salary Range Structure Practices Survey of
360 organizations.
Survey Dates: August 26 through October
25, 2010
Participants by Sector:
Technology 34%, Life Sciences 10%, Healthcare Services 8%, Other
48%
Participants by Number of Employees:
Up to 100:
11%, 101 to
500: 18%, 501 to 2,500: 28%, 2,501 to 10,000:
27%, Over 10,000: 15%
Participants by Ownership:
Public
43%, Private 35%, Non-Profit
15%,
Other 6%
Participants by Location:
United States 95%, Canada 5%
Copying:
If you copy portions of this article
into your own publication, please cite Culpepper as the source
by including the following statement:
"Source:
2010 Culpepper
Salary Range Structure Practices Survey,
November 2010,
www.culpepper.com"
Additional Resources
Salary Range Structures by Job, Job Family, and Job Function
Culpepper Compensation Surveys provide base salary range metrics
for individual jobs, job families, and job functions.
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Minimum of Base
Salary Structure Range
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Midpoint /
Control Point of Base Salary Structure Range
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Maximum of Base
Salary Structure Range
Salary Structure Advisory Service
Do you need help designing or updating your organizations salary structures?
Culpepper Compensation Advisory Services can help you design, audit, and
update salary structures based on your organization's unique needs.
To learn more about our Salary Structure Advisory Service,
please send a detailed email about your organization's needs to our
Compensation Consulting Team.
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