Midpoint as Control Point of Salary Range

Midpoint as Control Point of Salary Range

The following is an excerpt of lecture notes of lectures given by Lee Kok Wai on Compensation Management:

The mid-point of the salary range is regarded as the “target salary” for the pay grade, which would be the average salary of the staff in the pay grade. This is the salary that you will pay to a fully competent professional doing the job in that pay grade.

The mid-point is usually aligned to the market rates for jobs in the grade. The salary policy of the organization determines whether the mid-point is pegged to the median market rate or whether it is related to another point, for example the upper quartile.

Milkovich and Newman in their book Compensation (7th Edition) explained:

  • Midpoints correspond to the competitive policy
  • The point where the pay policy crosses each grade becomes the midpoint of the pay range for that grade.
  • Midpoints are the control point of the range.
  • The midpoint represents the base pay for a seasoned employee.

Here are 2 diagrams from Watson Wyatt to illustrate these points.

Salary Formula 35F

Salary Formula 35G

Source: Watson Wyatt

The points made by Milkovich and Newman in their book Compensation (7th Edition) is not universal. They apply to narrow grades rather than wide grades and broad bands, as illustrated below by Tower Watson’s diagram.

Salary Formula 35H