A quick intro to salary scales

Salary scales are the range of wages you pay a new hire to work in a particular job. They reflect the minimum and maximum salaries you pay a candidate for the position, which you might list on a job posting, and use to guide the salary you offer to a new hire. The lower side of the salary scale shows how much you would pay someone who meets the minimum requirements for the role, while the high end is how much you might pay someone who meets all of your requirements and preferences and is considered an exceptional hire.

One factor that influences salary scales is pay bands. 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. These jobs are often connected based on how much education, experience and responsibility employees are expected to have. Pay bands usually have a minimum and maximum wage range to show what the starting salary is for the category and the most that someone with the responsibilities will earn.

For example, you might have a pay band for administrative staff including receptionists, mail clerks, data entry clerks and executive assistants. 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.

Related: How to Hire Your First Employee

How to determine a salary scale

Here are the steps to help you decide what salary scale to use:

1. Write a detailed job description: Outlining the formal job title, duties and responsibilities, education and certifications, experience requirements and whether it is full or part time can help you understand how much authority you expect the person to have.
2. 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 seeing how much you pay people with similar positions in your company.
3. 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 see how much a quality candidate expects to earn.
4. 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.
5. 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 salary and whether you will be offering benefits such as health insurance, stock options, tuition reimbursement or other perks.

Related: What is Competitive Pay?

Best practices for managers

Here are the best practices for setting salary scales:

• 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 will 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.

Scale of salary FAQs

Here are some frequently asked questions about salary scales:

What is a salary scale point?

A salary scale point is where an employee’s pay falls within the salary range. A salary scale point is determined by the person’s experience, time with the company, performance and starting wage. When you hire someone, the salary scale point is what you determine their skills and experience are worth for the position.

How do you calculate a salary from a salary scale?

Many companies use the salary scale to calculate a salary by finding the midpoint. The midpoint of a salary scale is determined by adding the minimum and maximum wages of the salary range, then dividing by two. This midpoint usually reflects what you might pay a candidate who is qualified for the role but isn’t considered exceptional.