Types of Grades and Pay

Structure
Saad Farooq (2019-BBA-021)

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 Grade Structure
• A grade structure is the process of categorizing employees on the basis
of their designation and position in the company.
• There may be a simple structure or multiple grading structure
depending upon the organization.
• It depends upon:
• JD
• Employee KSA
• Experience
• Position and designation in the organization

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 Grade
• Grade is a way to categorize job based on their level of
responsibilities, skills and experience. C
E
O
(CFO,COO)

HODs

Senior managers

Managers

Front Line mangers

Entry Level 3
 Benefits of Grade structure
• It helps for
• Compensation benchmarking
• Employee benefits
• Employee increments and promotions

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 Grade wise employee benefits
Position Grade Mobile bill per month Medical Insurance per
year

Entry Level 1 700 50000

Executives 2 1000 1 lac

Managers 3 1200 1.5 lac

Senior Managers 4 1500 2 lacs

HODs 5 2000 2.5 lacs

COO 6 3000 3 lacs

CEO 7 5000 5 lacs

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 Pay Structure
• A grade structure becomes a pay structure when pay ranges, brackets
or scales are attached to each grade, band or level.
Grade Position Title Minimum salary Midpoint salary Maximum salary

7 CEO 150000 225000 300000

6 COO,CFO 90000 120000 150000

5 HODs 60000 75000 90000

4 Senior managers 40000 50000 60000

3 Managers 25000 32500 40000

2 Front line managers 15000 20000 25000

1 Entry level 10000 12500 15000

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 Features of Pay Structure
• Fair and transparent process
• Pay equity
• Market competitiveness
• Motivates employees
• Should be logical and not complicated for the employees

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 Pay Ranges
• Pay ranges may be described in terms of their span (the percentage by
which the highest point exceeds the lowest point).
• It shows the spread range. Pay range

Pay span = Maximum salary - Minimum salary

Minimum salary
Grade Position title Minimum Mind Point Maximum Range spread
salary salary salary
7 Assistant 5714 7143 8571 50%
manager

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 Differentials
• The percentage by which the mid-point of a range is higher than the
mid-point of the range below
• Typically between 15-25%.

Grade Position Minimum Midpoint Maximum Spread Differentials

Title salary salary salary range
2 Telephone 2030 2435 2841 40%
operator 23%
1 Office boy 1650 1980 2310 40%

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 Overlapping
• Overlapping in pay structure occurs when there is an overlap between midpoint
ranges.

For example;
Grade A : 24000-22000= 2000
Grade B : 24000-20000= 4000
Overlapping= above range/ below range
= 2000/4000
= 0.5*100
= 50 %
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 Small Overlapping vs. Large Overlapping

Small overlapping means Large overlapping means

to promote employees to promote the employees
the next level and without increasing too
increase their salaries. much of their salaries

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 Types of grade structure
• Narrow-graded structure
• Broad-graded structure
• Broad-banded structure
• Career family structure
• Job family structure
• Pay spines

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 Narrow-graded structure
• A narrow-graded pay structure is one that has a large number of
grades, with each grade having a narrow salary range.
• Also known as multi-graded structure.
• Typically consists of 10 grades sometimes 18 grades.
• Range spread 20 to 40%.
• Progression usually linked to performance.

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 Example
Grade Position Minimum salary Maximum salary
1 Entry level software engineer 50000 60000
2 Mid-level software engineer 60000 70000
3 Senior software engineer 70000 80000

In this example, there are three grades, with a narrow salary range
within each grade.

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 Broad-graded Structure
• Broad-graded structures generally have six to nine grades.
• Wider pay ranges.
• Range spread 40 to 60%.
• Progression linked to contribution.

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 Broad-grading at Bristol-Myers Squibb
• D1: Basic clerical, factory semi-skilled
• D2: Clerical and factory semi-skilled
• D3: Clerical and factory supervisor
• D4: Senior supervisor, entry level for professionals (eg scientists),
customer-facing sales staff
• D5: Customer-facing sales staff
• D6: First-level manager
• D7: Function heads
• D8: Business heads, eg finance
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 Broad-banded structure
• Broad banded structure have generally 4 to 5 bands in which job are
categorized.
• Range spread 50 to 80%.
• Progression linked to contribution and competence.

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 Broad banding at TESCO
• Work level 1 covers all clerical and some administrative (non-
executive) jobs.
• Work levels 5 and 6 are for main board and senior directors, whose
pay is determined on an individual basis.
• All other jobs are covered by work levels 2, 3 and 4, and it is the
occupants of these posts who are covered by the new broad-banded
pay structure.

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 Career family structure
• In career family structure, jobs are categorized based on their
functions such as HR, Marketing, Finance, IT.
• The job in each function have same role and worth.
• Same grade and pay structure for each family.

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 Example
Grade HR IT Finance

6 HR Director IT director CFO

5 HR manager IT Manager Accounts manager

4 HR Supervisor Infrastructure supervisor Account supervisor

3 HR specialist Senior technician Senior accountant

2 HR administration Network technician Accountant

1 HR assistant Junior Technician Junior Accountant

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 Job family structure
• Separate grade and pay structures for job families containing similar
jobs.
• Progression linked to competence and/or contribution.

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 Example
Job Family Job title JD Minimum Experience Pay range
education

Marketing Marketing Develops and Bachelor's degree 5 years of 75000-150000

manager executes marketing in marketing or a experience in
plans. related field. marketing.

Human resource HR manager Oversees the Bachelor's degree 3 years of 60000-120000

recruitment, hiring, in human experience in
and onboarding of resources or a human
employees. related field. resources.

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 Pay Spines
• Within the grades there are some points and every year employees
salaries increased by 2.5 to 3% basis on the organization guiding
principles.

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 Which grade structure should we follow?
• It totally depends upon:
• Organization structure
• Organization policies
• Available talent
• Organization budget
• Size of the organization

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 Compa-ratio
• Compa ratio is a formula used by HR to evaluate an employee’s pay
range and comparing the range to the market competitiveness.
• Also known as comparative ratio.
• It can help to identify employees who are underpaid or overpaid.

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 Calculation

Compa ratio = Current basic salary *100

Midpoint salary

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 Example(overpaid)
Grade Position Basic Salary Midpoint salary Compa Ratio

10 HR director 100000 90000 111%

Compa ratio= 100000/90000

= 1.11*100
= 111%
This means that employee is paid 11% above the market rate.

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 Example(underpaid)
Grade Position Basic salary Midpoint salary Compa ratio

8 HR Manager 65000 75000 86%

Compa ratio= 65000/75000

= 0.86*100
= 86%
This means that employee is paid 14% less then the market rate.

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Thank you…..
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