From reference points to bands

Which is best for my organization?
- 1 Traditional pay structure
- 2 Broad bands
- 3 Bands with reference points
For those of us who have grown up in compensation over the past 20+ years, the definition of a traditional pay structure used today may vary from the “textbook definition” we used to know. To most, though, it is defined as a collection of ranges, each with minimum, midpoint, and maximum pay guidelines. The range spread (i.e., the percent difference from minimum to maximum) typically is from 40% to 60% wide. The midpoint progression (i.e., the percent difference between the midpoint in a range and the midpoint associated with a range one level higher) typically is 10% to 20%, with the wider percentages being used for the higher valued jobs in the organization. Some have come to expect even a traditional structure to be somewhat more varied in range spread distribution, perhaps with ranges going from 30% to 100%, in order to accommodate the full organization, from the entry-level jobs up through executive-level positions. A traditional structure tends to have 10 to 30 ranges with jobs aligned to each in a hierarchical manner. You would not typically have overlap of jobs within a career path in one range.
This type of structure largely supports pay progression through the attainment of jobs in higher pay ranges. Flatter organizations that are encouraging skill development more broadly or are using more flexible approaches to work (e.g., agile) may not find the best support from a traditional pay structure. Note that traditional pay structures – and the construct of having a hierarchy for ranges of all with a pattern of progressing midpoints – can be used to manage salaried or hourly pay. For hourly pay, the approach is less common. When used, however, one typically sees lower range spreads and midpoint progressions.