Salary Structure Formulas Part 1

Components of a Salary Structure

Salary Formula 1A

Salary Formula 1B

Source: Center for Competitive Management

Salary Formula 1C

Key Considerations in Designing Salary Structure

There are certain key considerations in designing a salary structure:

  • What are the jobs and salary levels that the salary the structure needs to cover?
  • How many pay grades do you need or want to have?
  • How much distance do you want between pay grades (midpoint progression)?
  • How wide do you want your pay range to be (range spread)?
  • How much overlap do you want between grades (range overlap)?
  • How many structures do you need?

Key Concepts

Pay Group Set of jobs related by market, practices & organization purpose.
Pay Grade Jobs of similar value for example  in terms of skill, effort and responsibility
Pay Range Minimum to maximum pay limits
Midpoint Controls movement through pay range

Salary Formula 1D

Source: Tower Watson