What are the pros and cons of having a base pay structure with a constant midpoint differential versus midpoint differentials that increase with higher pay grades?
Constant Midpoint Differential
|Consistent treatment of promotions and salary management||May fail to reflect reality of market concavity|
|Easier to understand and communicate||Forcing constant midpoint necessarily results in higher discrepancy between market and wage structure (a better fit is achieved with two or three-tiered differentials than with a single one)|
Problems with Constant Midpoint Differentials
Constant mid-point differentials produce compression and failure to match normal incumbent pay progression patterns while expanding better matches real-world reality. People learn low-skill hourly jobs faster than complex professional/management jobs and tend to hit economically-justifiable maximum levels faster in the lower-paid positions, too. Salary expectations also are more tightly clustered at lower income levels while six-figure jobs can have tremendously wide market ranges and highly variable internal equity values that fluctuate even more with individual KSAs. Those observations do rest on a few normative assumptions, of course, and may not apply to a Broadband plan or to a classification system with extraordinary numbers of individual grades.
Increasing Midpoint Differentials
|Flexibility to reflect actual responsibility progression||A large discontinuity can drive the wrong behaviors (either create a high level of requests to jump over the breakpoint, or manager barriers to proceed with promotions when they imply a high differential).|
|Better reflects diversity of experience and competitive needs at the top compared to lower entry level clerical positions.|
Let reality dictate your midpoints, not some need for design consistency.