What is a salary scale?
A salary scale is the range of wages you pay a new hire for a specific job. It reflects the minimum and maximum salaries for the position, which you can list on a job posting to guide the salary you offer.
What are the key aspects of a salary scale?
Consider these key points before designing a salary scale. Let’s explore some of the key features that define them before looking at a step-by-step guide to creating one yourself.
Minimum and maximum ends of the scale
The low end of the salary scale shows how much you would pay someone who meets the role’s minimum requirements, while the high end is for an exceptional hire who meets all of your requirements and preferences.
How pay bands influence salary scales
One factor that influences a salary scale’s range is what pay band it falls into. Pay bands are groups of positions that are paid within the same wage range. Salary scales are usually calculated through a combination of the average wages for a position, the location and the pay band that the position fits into.
Factors that influence salary scale placement
Jobs that require similar levels of education, experience and responsibility are often within the same pay bands. Pay bands typically have a minimum and maximum wage range to show what the starting salary is for the category and the maximum that someone with those responsibilities will earn.
For example, you might have a pay band for administrative staff, including receptionists, mail clerks, data entry clerks and executive assistants. In this case, the pay band for administrative staff is $14–$18 per hour. The salary scale for receptionists is $14–$16 per hour, and the salary scale for executive assistants is $16–$18 per hour.
Career progression
When creating salary scales, consider how an employee’s pay would increase if they progressed into higher, more well-paid roles. More pay can be an incentive to progress in their career, so this can be important to consider when defining their role and its pay scale. Performance can influence an employee’s place in the pay scale.
Provide transparency surrounding pay to employees
With salary scales, employees can understand how career progression can lead to higher pay in your business. This provides a degree of transparency surrounding how much other employees earn and their earning potential if they progress into a more senior position.
Related: How to Hire Your First Employee
A step-by-step guide to creating a salary scale
Here are some steps that may help you decide what salary scale to use:
Write a detailed job description
Outline the formal job title, duties, responsibilities, education, certifications and experience requirements. Consider whether the role is full- or part-time to determine the person’s expected authority.
Decide where the position fits within your organization
You can use the job description to determine which pay band is the best fit for the role by reviewing how much you pay people in similar positions in your company.
Research wages for similar jobs and experience requirements
Researching the standard salary for the role based on the description, experience and education requirements can help you understand how much a quality candidate expects to earn.
Remember that more specialist or competitive roles may require a more competitive salary range, with the maximum offered to candidates with particularly advanced or specialist skills that could be of huge benefit to the growth and success of your company. Consider consulting a specialist recruiter to find out what could be a competitive salary for such roles.
Determine the minimum and maximum you will pay a new hire
Having a salary range can help you when you negotiate with your new hire. You can use the salary band, standard rates and your candidate’s experience to help narrow your scale. Also, consider factors like cost of living as well as company budget.
Consider compensation
Many people are interested in the additional benefits a company can offer them. Consider how often they will receive a paycheck, whether they will be hourly or salaried and whether you will be offering benefits such as health insurance, stock options, tuition reimbursement, 401(k) contributions or other perks.
Popular perks may change over time, which is why it can be useful to stay up-to-date with which ones are the most attractive to prospective hires.
Best practices for managers
Here are some best practices for setting salary scales to consider:
Design the salary scale before looking at resumes
Limit unconscious bias by deciding your compensation range before you start screening resumes. Determine what you are willing to pay for certain qualifications and use these to guide your hiring decisions.
Use research to find competitive rates
Understanding how much other companies are paying for similar roles helps you build a salary scale that may draw the best candidates. Research resources where similar companies share their pay rates to determine a fair price.
Base the salary scale on your organization’s pay grades
Using your pay grades to guide the salary scale allows you to offer fair compensation to the new hire in relation to other people in your company.
Consider hiring a compensation consultant
Compensation consultants can help you design a compensation philosophy, analyze data and decide on a salary system that works for your company. They could also, for example, suggest appropriate performance-based bonuses and perk structures alongside your salary system.
When creating a job description, having a salary scale is a useful way to prove to candidates that you understand the current market’s average. By having clearly defined pay scales, you can also demonstrate to your current employees what they can expect regarding potential career growth and pay progression.
