Broad banding
What is Broadbanding
Broadbanding is defined as a strategy for
salary structures that consolidate a large
number of pay grades into a few "broad
bands.
Broadbanding is a method of grouping jobs and
determining pay that makes compensation
administration more flexible and more responsive to the
needs of changing organizations. Broadbanding
eliminates the present hierarchical grading structure
and narrow salary ranges. In broadbanding, jobs with
similar responsibilities and skill requirements are
grouped in "bands" of job families, and pay is linked to
the market.
Broadbanding
When a system is broadbanded, one of
the main objectives is to reduce salary
ranges within a job family. The
broadband could be considered
successful if it reduces the salary ranges.
Themajority of organizations have been
successful, especially in the area of
management/supervisory employees.
Objective & Goals
Decentralize compensation management &
administration
Reduce the need for reclassification reviews and
improve speed of processing
Provide a mechanism to reward employees for skills and
competencies outside of annual salary recommendation
process
Provide more flexibility in pay for new hires
Attract & retain employees in high skilled areas
Maintain internal equity
Allow for geographic differentials and market
competitiveness
Use
Broadbands are imperative for companies with competency-based pay
programs, but are also used in companies with longevity- and
performance-based pay programs. Companies employ broad banding to:
promote career development / learning
empowering managers
avoid multiple pay structures
Focus on the person instead of the job
promote fewer, broadly-defined jobs
Broadbanding eliminates the possibility for precise job analysis/evaluation
Benefits of Broadbanding
Broadbanding has been successfully implemented in large,
hierarchical organizations which attempted to flatten their
organizations and remove levels of management. For example,
organizations that had eight levels of management could eliminate
four levels, widen the salary ranges of the remaining four levels,
and simply slot each manager into one of those ranges.With
broadbanding, a manager can more easily encourage his/her
employees to broaden their skills and abilities. This is valuable to
organizations because employees with broad skills and abilities are
critical for the success in a total quality/continuous improvement
environment.
Cont…
Broadband pay structures encourage the development
of broad employee skills, because non-managerial
jobs are appropriately valued and skill development is
rewarded. Additionally, a broadband pay structure is
not as sensitive to changing market pricing conditions,
so they cost less to administer and manage over time.
In a broadband pay structure, the numbers of salary
grades are consolidated into fewer, but broader, pay
ranges. In broadbanding, the spread of the pay ranges
is wider and there is less overlap with other pay
ranges.
Elements of Broadbanding
Pay Grade
A pay grade is a step within a compensation system that
defines the amount of pay an employee will receive. The pay
grade is generally defined by the level of the responsibilities
performed within the job description of the position and the
length of time the employee has performed the job.
Salary Range
Range is the range of pay that has been established to be
paid to employees performing a particular job or function.
Salary range generally has a minimum pay rate, a maximum
pay rate, and a series of mid-range opportunities for pay
increases. The salary range is determined by market pay
rates, established through market pay studies, for people
doing similar work in similar industries in the same region of
the country.
Cont…
Bonus Pay
Bonus pay is compensation over and above the amount of
pay specified as a base salary or hourly rate of pay. Bonus
pay is used by many organizations as a thank you to
employees or a team that achieves significant goals. Bonus
pay is also used to improve employee morale, motivation,
and productivity
Variable Pay
Variable pay is employee compensation that changes as
compared to salary which is paid in equal proportions
throughout the year. Variable pay is used generally to recognize
and reward employee contribution toward company
productivity, profitability, team work, safety, quality, or some
other metric deemed important.
Salary Range with Broadbanding
40000
Range
30000
Pay
20000
12000
A B C
Pay Grade
Learning
Broadbanding is an attractive alternative rigid, structured,
specialized, and hierarchical organizations. A solution that captures
the benefits of both broadbanding and traditional salary structure
includes:
• Salary ranges with a 40% to 50% spread between the salary range
maximum and minimum.
• A limited number of broad and general job descriptions.
• A flat organization structure with a limited number of pay levels.
• Advancement criteria which includes the attainment of a broad
set of skills.
THANKS
