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IDear Workforce-I How Do I Grade Salaries

Keep it simple and consider external equity.
March 1, 2000
Related Topics: Compensation Design and Communication, Dear Workforce, Compensation

Dear Workforce:

I am the Recruiter/Staffing Manager for a growing company with over 600 employees. To date, we have not had any salary ranges/grades for any of our positions and are looking into doing this. We do have job descriptions for each position. Does anyone know where I can get information on how to go about grading each position?

We sell discounted china, crystal, flatware, and collectibles and have a telephone call center, retail store, shipping department and inventory department.

Dear Grade:

Two resources for information to get you started on this project are the American Compensation Association and the Society for Human Resource Management.

These organizations both carry a wealth of information in published materials regarding job evaluation that can be purchased from their Web sites and are available to both members and non-members. There will be a variety of books that contain the know-how for you to develop a job evaluation process.

Regardless of the position evaluation process you end-up with, we offer you the following advice:

  1. For positions where you have competitive compensation data, external equity (competitive pay rates) should be the first consideration when slotting positions into pay grades, not internal equity (as determined by your internal position evaluation process). For example, positions are "slotted" into grades based on the salary midpoint that best approximates the position’s competitive pay rate.
  2. For positions that are unique or have additional responsibilities compared to available survey position matches, internal equity of a position is typically utilized to slot a position into a salary grade.
  3. Hourly pay rates for the same position may vary significantly by geographic location. This will be an important consideration for you because, based on the description of your organization, you probably have a relatively large hourly workforce.
  4. Keep the position evaluation system simple!

You should trust your own judgment as to what type of system will be within your staffs’ ability to perform and get the most management and employee buy-in.

Good Luck.

SOURCE: Thomas M. Tabaczynski, Rewards & Performance Management Practice, PricewaterhouseCoopers LLP.


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