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How can I organise and manage my pay structure?

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You want a pay structure for your jobs that can be used to organise and influence future pay decisions.

To develop a pay structure, you need to understand two things: pay levels in the markets that your business operates in, and how your actual pay levels compare to the market. A pay structure is what ultimately manages this relationship, so your decisions can be visibly consistent, fair, cost-effective and competitive.

Reviewing salaries through pay benchmarking is an important factor in deciding what to pay your people. Unless jobs are clearly structured, pay decisions can become inconsistent and unfair – causing lower employee satisfaction and increased attrition.

Developing pay structures

Developing pay structures involves six key steps:

  1. Identifying sources of reliable market data - so that you can conduct market benchmarking. Finding out where employees come from, and go to, will help you decide what information you need; this is likely to differ for different groups of employees depending on skills sets, geography and so on;
  2. Comparing like-with-like jobs - this is about finding data for the right type of job from the right type of companies, and selecting data for comparable roles; you need business tools that will help you to do this (or a survey with well-defined jobs);
  3. Deciding what type of pay structure you want - there are two basic types – a single structure that covers all roles, or multiple structures which are often based on job ‘families’. You also need to decide whether to underpin your structure with a job evaluation system;
  4. Comparing the assembled market data to your internal data - depending on your business size and complexity, this can be tricky; be extra careful if using a spreadsheet approach, as these can become unwieldy unless you’re very experienced in this area;
  5. Developing the pay structure - based on the ‘best fit’ between the market data, your internal data and budgetary needs. This is an iterative process; you need to work with individual salary data rather than pay averages, to iron out any anomalies; and
  6. Distributing pay through the ranges - which provides insight into the type of salary management issues you may face. For example, if lots of people are near the bottom of the range, you may face pressure for pay progression; if the majority are clustered towards the top of a range, you may not want to award further base pay increases.

How Paydata can help with pay structures? 

If you’re reviewing your pay ranges or creating new pay scales, we can help you to:

We can help you develop and implement a pay structure that meets your business needs, by offering

  • Pay and benefits benchmarking to understand the market – creating a structure that balances the need to pay market rates with managing your costs
  • Pay modelling so that we do the legwork involved in organising your internal data and selected market data; this removes the need for spreadsheets and lets you concentrate on the results without the hassle of data management
  • Job evaluation software that helps you match your jobs to the market more accurately, and fits with job sizing methods used by all the major salary survey providers