There is need to establish a salary pay scale for employees within your business. The pay scales can be developed either through a management fit, a skill-based pay, the going rate, competency-based pay, broadband, or the through job evaluation and pay to grade. Key components in establishing and maintaining pay grades include; commitment and participation of the management in developing minimum and maximum pay for the organization, creating pay grades that support the company’s compensation philosophy, and determining how to adjust grades over time ( Moore, Michael, and Viscusi, 36). A salary structure allows ease of administration, ensures pay equity, and clarifies the subjective value for each job. Establishing a pay grade and salary ranges system in business has the following steps:
Setting overall pay range: As the owner of the firm, you need to determine a company’s maximum and minimum fee. The maximum salary will be for the last highest grade while the minimum will be for the first and lowest grade. In this, one needs to include the company’s compensation philosophy to lag, lead, or pay at the market. Step two involves establishing the number of grades. Grades should be selected based on job evaluation results, the size of the company, and job diversity. The number of categories also depends on the difference between the lowest and highest paid jobs.
Step three involves setting a range per grade. The minimum of one degree may overlap the maximum of another and vice versa. The range that has room for advancement and room for many experiences creates a balanced variety. After setting range, one then creates a grade chart. A grade table is created through calculating the midpoint by dividing the sum of the minimum and maximum. Once done with these steps, one is required to review and amend. There is the need to determine how frequently the pay grade will be examined and how amendments will be made. Pay grade and salary ranges are essential for an organization as they facilitate budget decisions and quantifies compensation. Failing to review a pay structure may demoralize employees’ and reduce productivity.
Work Cited
Moore, Michael J., and W. Kip Viscusi. Compensation mechanisms for job risks: wages, Workers' Compensation, and product liability. Princeton University Press, 2014.
