DESIGNING PAY STRUCTURE

Designing Pay Structure



Designing Pay Structure

Organizations develop and implement salary structures to provide a framework for administering their employee compensation programs. Effective administration of a compensation program requires a balance between the pay levels for employees inside the company—internal equity—and the pay levels those employees could command in the company's recruiting markets—external equity.

For example, some program managers in the ASA saw an increase in the number of staff working under them, and thus took on more supervisory accountability. Managers in the Behavior Health Services (BHS) services saw their job functions shift toward dealing with state regulations and federal laws. Those managers had to learn state and federal law in order to comply with the new job requirements. In the newly created Adult and Disability Service (ADS) area, managers' functions extended to include the mastery of federal laws such as the “Health Insurance Portability & Accountability Act” (HIPAA) and the “Federal Deficit Reduction Act,” as well as numerous other data privacy laws.

In many of the service units, duties became multifaceted. While most of the managers' job accountability increased significantly post-restructure, the organization's salary structure remained the same. Employees whose job functions increased and became more complex continued to receive the same pre-restructure salary. The salaries of managers with newly added job responsibilities did not differ from managers in equivalent positions, whose duties did not change following the formation of the new HSPHD.

Backbone Of Recruitment Strategy

Remuneration management has been confounded by enormous growth in the complexity of roles, jobs, technical skills and knowledge, and internal and external pressures on remuneration. Taken together with technological change and rapidly changing employee expectations, a complicated series of pay points has been the result, with a landscape of different job, career or technical streams each having its own remuneration structure.

Pay Structures

There are several broad patterns that have emerged (Langley 2008)

Individual rates

Whether a single hourly rate, or a senior executive's annual salary, or perhaps a limited range of rates negotiated with the individual, the key point here is that there is tight linking of rate to job, or even to individual person—implying a very high number of different rates. The high maintenance cost that this implies is perhaps the reason that this model is usually associated with executive salaries (Egan 2010a).

Broad-banding

At the other end of the scale, broad banding (or broad-grading) offers only a few bands with a range of rates, and typically has little barrier to progression within a band. Strictly implemented, this can lead to drift upwards to the top of a band, and loss of pay relativities

Narrow-banded pay structures

These feature a larger number of bands arranged in a vertical progression, with a small number of increments to each grade or band. Typically used for manual and clerical jobs (Egan 2010a), for the organisation, this structure offers more control than broadbanding, and more certainty than individual rates. However, if there is only a limited number of steps available to employees, then there may be pressure to upgrade ...