What Are Pay Bands & Why Are They Important

Duration: 5-6 minutes

Definition Pay Band

Pay Band is a system which provides the minimum and maximum salary for a particular type of career or position. Various salary grades that lie between the set compensation scale that represents several levels of experience or qualification.

The salary bands can provide some concrete benefits to any size of firm. The employers can work much more closely with their HR personnel to flag the particular range assigned to each band in all organizational levels. It is imperative as an organization to keep plugged in diligently because you have to be aware of any market shifts at all times.

Pay bands define the ranges that go on to determine the optimum compensation an employer can pay to an employee as a result of their job role.

Pay bands, in other words, represent that area or range which encapsulates the least and highest amount of money to be granted for compensation by a company.

For instance, a dynamic technology company might bind the pay of a ''computer hardware engineer'' to fall within a $75,000 and $90,000 range.

By doing so, a potential employee is alerted to the salary they can expect to earn approximated within that range, and the information can be used in the negotiations that would determine how much they will be able to receive for their payment financial package. Generally, the range is given by the employers in the job description and further elaborated on while interviewing the applicants.

Why Do Organizations Use Pay Bands?

The use of pay bands is an approach taken by many organizations to harmonize the way the money that is owned to the organization is expended. By rewarding individuals in the organization in regard to their work input, an organization is greatly capable of impacting its budget. It is in this light that the company''s top managers come up with a pay band to ensure they do not pay too much of the money to man one position and too little to man another.

A company will also satisfy federal mandates by putting them into action such as prioritizing pay equity.

It demonstrates to potential and existing employees that the compensation design of management was made through an equitable process, in addition to adhering to a consistent level of rewards irrespective of any personal attributes of any applicant from the perspective of the position.

Benefits of Pay Bands

There are many but here are the top benefits you need to be aware of:

Attract Top Talent

The pay band can influence a candidate''s decision in joining your organization. In fact, including the salary band within the job listing increases organic search, which means users searching for a specific job can separate your company.

It depicts that you are prepared to provide an attractive compensation package for this open position. This will save potential applicants'' time as they will have the ability to quickly determine if the salary range given will be suitable to them before proceeding to apply for the position.

For example, take a sales representative as the applicant. This applicant stumbles upon two identical job postings with the same responsibilities and eligibility conditions. One company discloses the salary rate, and the other does not disclose the basic and necessary salary information, then the applicant will most likely apply to work for the organizations that openly and transparently report the pay structures.

Higher Employee Retention

A study conducted on salaries showed that 60% of employees admitted that if they are made aware that their salaries are fair or justifiable, they would prefer to stay glued to that particular organization. Secondly, firms that have retained workers have a pool of internal talent that contributed significantly to meeting the firm''s goals.

Having a uniform pay scale makes the compensation structure simple for employees sharing the same job title and can also create pay parity. This refers to ensuring that people are compensated fairly relative to their colleagues.

Competitive pay is when the employer with similar job obligations pays the employees at a rate that is consistent with other employee compensation packages and practices for a particular industry or an appropriate market.

Here, competitive pay is perceived by employees as a form of compensation from their employer and being right and fit for their jobs and according with the set expectations in the line of work, it increases their degree overall of job satisfaction.

Better Acceptance Rate

For example, a survey on Glassdoor showed that pay package was the number one consideration for almost a third of those looking for a new job.

Candidates feel more likely to accept a job offer from such an employer who offers an appropriate wage package.

Being informed about where their wage sits in the range of a position might offer them a great understanding of how much their earnings will increase through their career and as their experience grows.

Letting the pay range be open in an interview lets the employer and candidate exchange ideas about salary. Hopefully, both parties agree upon a number that makes sense.

And there you have it! Everything you need to know about a pay band. We hope that you will now create pay bands for different roles and positions, which will be most reasonable and effective for the organization.