Broadbanding Pay Structure

Prepared By: Krunal Bosamia Kratika Chaurey

What is Pay Structure?

A pay structure is a collection of pay rates or pay ranges.
A pay structure is a collection of pay grades, levels or bands, linking related jobs within a hierarchy or series, that provides a framework for the implementation of reward strategies and policies within an organization.

Types of Pay Structures?

Graded Structure (Traditional) Broadbanding Job Family Structures Market Pricing

Why Pay Structures?

Establish a logically-designed framework within which equitable, fair and consistent reward policies can be implemented
Determine levels of pay for jobs and people Help monitor and control the implementation of pay practices Communicate the pay opportunities available to employees.

What is Traditional or Grade Pay Structure?

A sequence of overlapping job grades into which jobs of broadly equivalent size are allocated. Each grade has a range, the maximum of which is usually 20 to 50% above the minimum.
Grade 1 2 3 4 Salary Minimum Salary Midpoint 7500 9500 11500 14000 10000 12000 14000 17000 Salary Maximum 12500 14500 16500 20000

Limitation of Traditional Pay Structure

Broadbanding
Broadbanding is defined as a strategy for salary structures that consolidate a large number of pay grades into a few "broadbands. In 1990s, broadbanding becomes a major tool of the compensation specialist involved in the redesgin of pay plans.

A major developer & user of broadbanding has been Watson Wyatt Data Services.
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Watson Wyatt developed a 25 grade pay structur that they merged into six Broad Grade Band Definitions.

Six Definitions are,

Top Management 1 Top Management 2 Middle Management Professional / Administrative / Junior Mgt. Clerical / Technicians Manual / Junior Clerical

Why Broadbanding..?
Creating organizational flexibility Reduce or de-emphasize hierarchy Encourage employees to improve their competencies and engage in career development Decentralize compensation management & administration Maintain internal equity

Advantages of Broadbanding
Streamlines Hierarchy Facilitates Internal Movement Puts Added Trust in Management

Disadvantages of Broadbanding
May Lead to Inequities Lack of Cost Controls Promotions

Traditional v/s. Broadbanded