STEP 1: ESTABLISH OVERALL PAY RANGE STEP 2: ESTABLISH NUMBER OF GRADES STEP 3: ESTABLISH A RANGE PER GRADE STEP 4: CREATE PAY GRADE CHART STEP 5: REVIEW AND AMEND

By on 24-11-2018

HOW TO SET A SALARY SCALE FOR YOUR EMPLOYEES 

• STEP 1: ESTABLISH OVERALL PAY RANGE

Determine a company minimum and a company maximum pay. The minimum will be for the first and lowest grade and the maximum will be for the last and highest grade. Use a listing of all company positions or job groups and current salary survey data relative to those positions to set these parameters and incorporate the company’s compensation philosophy to lead, lag or pay at market.

• STEP 2: ESTABLISH NUMBER OF GRADES

Select the number of grades to be used based on the size of the company, job diversity, job evaluation results, etc. Large companies may find it more practical to use more grades ; small companies might elect to use fewer grades.

• STEP 3: ESTABLISH A RANGE PER GRADE

Set a minimum and maximum for each grade. The maximum of one grade may overlap the minimum of another and vice versa

• STEP 4: CREATE PAY GRADE CHART

Using the sum of the minimum and the maximum, calculate the midpoint by simply dividing that sum by two ([Max + Min] / 2 = Midpoint).

• STEP 5: REVIEW AND AMEND

Determine how often the pay grade will be reviewed and how often adjustments will be made. Annual salary and salary structure increase projections can be used to adjust as needed. Pay grades are typically reviewed every one to three years.