What are salary bands?

Salary bands are pay ranges established by individual organizations for specific roles. They typically define the value each role has, based on market value and internal value, and provide opportunities for more effective pay management.

“If your salary bands are not competitive in the current market, it will be difficult to attract and retain talent.”

—Kathy Gusich, executive recruiter

How does pay banding work?

Jobs with similar work requirements are grouped within a salary range. All employees working in these jobs are in the same salary band. Employees above the senior level are in a higher band.

These bands can overlap and often do. However, recently promoted employees who move up to the next-highest band don’t always see a salary increase due to the overlap, even though their potential salary increases as a result of a higher maximum within the new band.

Salary bands vs. pay scales

Salary bands differ from pay scales, which often come up in negotiations. Pay scales provide both minimum and maximum amounts that guide both parties in deciding pay. Salary bands, however, rank job pay by experience, education and level of responsibility. Individual organizations set their own standards for these areas, with location and finances having the most significant impact.

Common occupations

Some industries and roles use salary bands more than others. They’re typically used in areas with varying levels of the same general role, where each level requires more responsibility or training than the others. Common occupations that use salary bands include nurses, teachers and bankers.

Salary band examples

The federal government uses the General Schedule Payscale, which is a hybrid pay banding system. These salary bands have 15 grades, each with specific education requirements and job responsibilities and 10 steps that are dictated by seniority.

There are several other pay-branding systems for the military and executives, but for civilians, the levels are as follows:

• GS-1 base pay starts at $22,807, with a maximum of $28,529
• GS-2 base pay starts at $25,645, with a maximum of $32,271
• GS-3 base pay starts at $27,983, with a maximum of $36,373
• GS-4 base pay starts at $31,411, with a maximum of $40,839
• GS-5 base pay starts at $35,143, with a maximum of $45,682
• GS-6 base pay starts at $39,175, with a maximum of $50,926
• GS-7 base pay starts at $43,533, with a maximum of $56,596
• GS-8 base pay starts at $48,210, with a maximum of $62,678
• GS-9 base pay starts at $53,249, with a maximum of $69,222
• GS-10 base pay starts at $58,639, with a maximum of $76,228
• GS-11 base pay starts at $64,426, with a maximum of $83,750
• GS-12 base pay starts at $77,220, with a maximum of $100,390
• GS-13 base pay starts at $91,826, with a maximum of $119,375
• GS-14 base pay starts at $108,510, with a maximum of $141,062
• GS-15 base pay starts at $127,636, with a maximum of $165,925

The GS-1 band is for civilian workers without a high school diploma, while the GS-2 and GS-3bands are for those with a high school diploma. Starting at GS-4, workers require an associate’s degree, while GS-6 workers require either an associate’s or a bachelor’s degree. GS-9 starts with a master’s degree and GS-12 requires either a master’s or a doctorate.

As pay bands increase, the steps between them also increase.

Benefits of creating salary bands

Implementing a pay band system provides transparency that enables salary comparisons. Because it’s a stepped system, employees have a better understanding of the pay differences between similar roles. Salary banding can identify employees who may be under- or overpaid, which may help reduce the gender pay gap.

Companies may have a better chance of attracting and retaining top talent while providing current employees with a clearer understanding of promotion paths and expectations.

How to create salary bands

Following these steps can help you create salary bands within your business:

1. Review your job descriptions

Advise your human resources team to conduct surveys or work with managers at all levels to identify what each role does on a daily basis. Once you collect information from all levels of your business, you and your HR team can create official job descriptions. Compare your roles with similar roles in other organizations for additional guidance.

2. Rank your organization’s roles

When you have recorded your new or updated job descriptions, rank job positions according to their qualifications and responsibilities. Achieving this may require implementing a point or classification system. Your HR teams can determine the best ranking system for the business.

3. Research related markets

The U.S. Bureau of Labor Statistics (BLS) and Indeed Salaries provide detailed information on many job roles, including pay averages, ranges and trends across roles and industries. When researching compensation, ensure the functions and responsibilities of your roles align with the roles you’re reviewing on BLS and Indeed Salaries so you’re making accurate comparisons.

4. Create pay grades

When you’ve gathered and analyzed the market data, you can work with your HR team to group positions with similar pay. Each group you create makes a pay grade. Small businesses may have a limited number of different pay grades, while larger businesses may have more.

5. Create ranges within the grades

Within each pay grade, determine the minimum, midpoint and maximum pay range. There are no right or wrong methods, as they are unique to your business. Avoid large ranges unless you own a small business or have budgetary limitations.

6. Monitor and update

Salaries are always changing, depending on the current health of the market. With the help of your HR team, you can monitor market trends and how they’re influencing pay within your industry. Small changes occur frequently, but large changes may require an update to salary bands.

Salary band best practices

These are some best practices when using salary bands:

Monitor your salary bands

Once your salary bands are built and in place within your organization, monitor them along with market changes. Keeping up with new trends or market fluctuations allows you to adjust your bands as needed.

Stay on budget

While a particular salary band may fit your budget, it’s common to offer incentives, bonuses or other benefits to employees. When doing this, ensure your current budget accounts for both the salary band and any incentives you offer within each band.

Consider your current structure

If you’ve already established a pay structure and plan to use salary bands, consider your overall competitive structure.

For example, when determining salary ranges, consider the following options:

• Pay higher than the market average to retain employees.
• Pay the market average to attract good candidates.
• Pay lower than the market average due to financial constraints.

Salary bands may establish structured pay ranges for roles based on responsibility, experience, and market value, promoting transparency, fairness and talent retention. By grouping similar jobs and monitoring market trends, you can help ensure competitive compensation while controlling costs.