What are the different types of pay structures?
There are four main pay structures in the UK. They are:
- Individual pay ranges
- Pay spines
- Job families
A typical pay structure example in the UK is ‘Individual Pay’. Essentially, companies give each employee a pre-determined pay range based on their individual job role. This means a bookkeeper and an administrator will both have their own pay ranges unique to their job roles. Employees will likely have a clear idea of what their roof salary is and how they can get there. Where a pay range isn’t applicable, an individual pay rate will fall into this bracket. This is when each job role has its own salary, although the absence of a pay range makes it almost impossible for an employee to earn more unless they get a promotion. Depending on the sector, however, this could work well.
Broadbanding is a pay structure example that loosely groups similar job roles together and puts them together in the same pay range. Typically, every employee starts at the bottom of the relevant pay range and has the opportunity to move up incrementally until they reach the top. At this point, they may get a promotion and move to the next range, which could be a managerial scale that works in the same way.
Pay spines are simple in nature and involve entire companies operating on the same incremental pay structure. Moving up the ladder usually comes as a result of loyalty, with the advantage of this being that employees can clearly see their next salary steps, and this could encourage loyalty.
Job families are a combination of the above pay structures. They group together similar roles that fall within the same department, but pay increases are determined based on experience and knowledge. This means a marketing assistant and a marketing manager may be grouped in the same job family, but the salary of the marketing manager will be higher based on the fact that it’s a more senior and experienced role. Despite this, employees can see opportunities for progression clearly, and there is plenty of scope for them to work with.
Designing a pay structure
Once you’ve picked which pay structure will work best for your company, there are elements to consider before you get started on design:
1. Set out relevant job positions
As most pay structures rely on specific job roles, you need to ensure you have a comprehensive list of all the job roles within your company. If your business is one that is loose with job roles, it’s worth looking at implementing some formality and defining them clearly. This will not only help with determining a pay structure, but it will also clarify what’s expected of your employees, too.
2. Analyse pay across the industry
The third step in designing a pay structure is to analyse pay across your industry for each job role you have laid out. This can be done based on your own research, or, for a more realistic idea, you can use Paydata’s salary benchmarking tool to ensure that what you are offering is fair and competitive. This may mean holding a pay review, but doing so is integral for creating a professional pay structure that compensates your employees in line with your competitors.
3. Check other perks/benefits
You will now want to look at other benefits on offer to your employees. For example, you may have a junior position within your pay structure who not only earns a salary but also benefits from free tuition courtesy of yourself. Any additional costs such as this will need to be factored into the pay structure design.
How Paydata can help
Establishing pay grading and designing a pay structure around it is a complex process, especially for large companies. The Paydata team are experts in assisting with pay reviews and structures. For more information and advice, please contact us.