⚠️ Salary Bands module is a premium tool. If you're not yet a subscriber, you can contact us here to get access.
Deciding the structure
Structuring your salary bands is crucial to tailor them to your company's needs. This process involves deciding the number of levels, job titles and locations required in your salary bands.
Use your compensation policy to determine the range’s midpoint
Your compensation policy should guide salary band creation. If you haven’t defined one yet, start there! Key points to cover:
Market positioning: Do you aim to pay at the 50th percentile, 70th, or vary by role?
Geographic strategy: Will pay be location-based or standardized?
Defining these helps interpret market data and set salary midpoints (which Figures can automate for you!).
Salary range width
| Pros | Cons |
Narrow | Fewer discrepancies within the team | - Fairly rigid for hiring (no negotiation possible) - Less possibility to reward performance outside of promotions |
Wide | - More margin for negotiation - More room for employee evolution - Ease employee performance recognition outside of promotions | More discrepancies between 2 employees at the same level supposedly doing the same job |
Both wide and narrow salary ranges have pros and cons. A common market practice is +/- 10%, allowing growth without large discrepancies.
Best practice: Widen ranges at higher levels, as it typically takes longer to move from Senior to Staff than from Junior to Intermediate, giving more room for growth at senior levels.
Should your salary ranges overlap from one level to the other?
Range overlap occurs when salary ranges for different levels intersect. While not required, it offers flexibility for various cases:
Superstar employees: Quick promotions can result in smoother, smaller salary increases, avoiding financial strain while keeping compensation engaging.
Slow promotions: Employees can reach the top of their current range before promotion, then smoothly transition near the midpoint of the next level.
Pros | Cons |
- Greater flexibility and growth options - Accommodates those who may not want to move up quickly | - Employees at lower levels may be paid similarly to higher-level peers - Promotions might not lead to significant pay increases if overlap is large |
Next step
Once you have your structure in mind, you can move on to the next stage: creating your levels, jobs and locations.