Considerations on Size of Mid-Point Progression

What to Consider on Size of Mid-Point Progression

The smaller the mid-point progression, the larger the number of pay grades within the pay structure. If we use a smaller mid-point progression:

Ranges/midpoints more closely represent the market. Harder to administer.
Little distinction between grades, harder to for internal equity.

The larger the mid-point progression, the fewer the number of grades within a pay structure. If we use larger midpoint progression:

Easier to group jobs and segregate which jobs belong in each grade. Ranges/midpoints may not
May not be enough levels to accommodate all job family levels.

Somewhere in between a smaller and a larger midpoint progression usually works the best.

It is common for the midpoint progression percentage to increase as it progress from the lower level jobs up the organizational structure to the higher level jobs. The reasons for this are:

In the lower level jobs (a) the skills required to advance are less complex and easier to obtain (b) the job incumbent is able to advance to the next level quickly (c) job opportunities more available.

In the higher jobs (a) the skills required to advance are more complex and harder to obtain (b) the job incumbent tends to stay in the job for a longer period of time (c) advancement opportunities are less available.

Some Practical Advice

Rebecca A. Richards in her book HRWorks Handbook: Salary Administration gave some advices on how to work on the mid-point progression:

The mid-point salary will be based on your corporate salary policy. For example, if your corporate salary policy is to pay all positions at the 50th percentile, the midpoint salary will be the 50th percentile salary for each benchmark job.

A mid-point differential of 7% is a good rule of thumb for clerical job grades. A 10% and 15% differential would be for supervisory/paraprofessional and management level grades respectively.

When you calculate the mid-point differentials of the benchmark jobs from your salary survey, you will probably find both wider and narrower gaps than the rules of thumb.

If you find an unusually small or large gap between 2 particular job grades, you can insert or delete additional job grades using the mid-point progression percentage rules of thumb. This smooths out the structure while being true to your market data.

Start with your most important job grade and work up and down from it. This will ensure that your most important jobs are paid competitively. The most important grade will vary between companies, but common criteria are:

  • The job grade with the most employees.
  • The job grade with the most salary-sensitive jobs.
  • The job grade with the highest payroll costs.
  • The job grade containing jobs that are key to the business.

It is alright to have a job grade without any jobs in it. In fact, it will be valuable in the future when a new job is created or an old job is reclassified.

It is important for internal ay equity that you stick to your own hierarchy, even if certain jobs are paid significantly differently by the market. Do no rearrange your hierrarchy by moving jobs from one grade to another to suit the market data.

If you have incomplete market data, you can still build your salary ranges into a reasonable salary structure. Use the midpoint for this job grade and the rules of thumb given above to calculate hypothetical mid-points for all other job grades above and below it.