The 4 Approaches to Pay Structure

For companies that have cut back on pay for a few years (who hasn’t?), it’s time to take a look at your status, says Daniels, who is senior consultant at Keating Advisors, LLC. You may well have fallen behind or your structure may no longer align with your strategies.

Review Your Current Base Pay Structure

Ask yourself these questions, says Daniels:

• Does your current base pay structure support both market competitiveness and internal equity?
• Do you have enough, too few, or too many salary ranges?
• Are the current range spreads (difference between the minimum and maximum) the right width for your organization’s approach to compensation?
• Does your current base pay structure have clear level definitions?
• Do employees know how to move up in the structure?
• Is your base pay structure linked to the organization’s desired market positioning?
• Is the base pay structure adequately integrated with other programs (e.g., performance management, career planning)?
• How do employees feel about your program?

Common Types of Base Pay Structures

Daniels says there are four basic types of pay structure, each with distinct advantages and disadvantages:

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You May Need More than One Base Pay Structure

Sometimes, organizations require more than one base pay structure to suit their employee populations.

The reason one might develop various pay structures is because the market paylines for a given group of positions support a faster pay progression (e.g., the rate at which pay increases for executive positions tends to be higher than for nonexempt positions) or very different base pay for positions at the same organizational level (e.g., program coordinator and IT coordinator).

Some common examples of groups that may require a separate base pay structure include:

• Nonexempt Positions
• Professional & Management Positions
• Information Technology
• Licensed Medical Positions
• Executives

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