Salary bands 101

What's a salary band?

At it's most basic level, a salary band is a structured range of pay for a specific role in a company. Typically, salary bands are built using a combination of factors such as level of seniority, location and role. But just like every company is different there's no single approach to building salary bands.

Why are salary bands needed?

• Transparency and trust: building employee trust in your compensation approach is crucial to the success of your reward strategy. Get that wrong and no matter how good your reward package is or how high compensation is versus the market, lack of trust and understanding will make your team will be deeply unhappy about it all. Being transparent about how salary bands are built starts building trust in the pay structures in place as well as an understanding of how salary progression can work.
• Fairness and equity: having salary bands will lead to fairer and more equitable decisions. You have a framework within which to operate and which is used for everyone in the same way to inform your choices. This in turn reduces potential biases and pay equity risks - justifying a salary decision with “just because” is never good enough.
• Talent attraction and retention: building on the above points, getting to a stage where employees trust and understand your pay practices can bolster retention and perceptions of pay fairness. Market competitive salary bands will support your search for talent, specially in very competitive and on-demand sectors.
• Budgeting: Salary bands are essential to forecast a host of people related costs - this is often the single most expensive line item for companies. So getting it wrong can have a real detrimental impact on any business and harm the development of people strategies.
• Performance management: in the context of career growth, having salary bands is an invaluable tool to set expectations for both employees and employers. It also supports a performance driven pay strategy giving you a framework for making and communicating pay decisions during review cycles.

Cannot wait to implement them in your company? Keep reading for some helpful how-to tips!

Salary bands building: need to know steps

1. Define your job hierarchy: Job hierarchy is simply the structure of the roles in your company - what type of roles exist in your company and what are their levels of seniority. See an example of a Software Engineering (individual contributor) job hierarchy on the right.

   This step will enable you to understand how many bands you need, for how many roles and how you can best match the career growth they offer with salary progression.

   Job Title	Level
   Software Engineer	D
   Mid Software Engineer	E
   Senior Software Engineer	F
   Staff Software Engineer	G
   Principal Software Engineer	H

2. Determine your market and your market positioning: know who you compete against, not business-wise, but for talent. These are companies that want to attract and retain the same people you do. Also, don't forget to check on specific legal requirements. Your next decision is to determine how your want to position yourself against them. Do you want to pay the average of what they pay or higher? If so, how much higher? Do you pay all roles at the same market positioning or vary your approach to some? Which leads us to…

3. Budget: what level of investment are you able to leverage now and in the future? Think about the costs of implementing those salary bands to your existing teams now and how you can enable sustainable pay progression due to career growth, performance or market movement.

4. Communicate, communicate, communicate: no, really. You can never communicate enough. A well-defined implementation plan with simple and clear communications to your teams will be the key to success for embedding salary bands into your business. This will help you create the right environment to build the rest of your reward strategy on.

5. Review and update: salary bands aren't static so factors like the talent market, roles you have, location(s) you operate in or your budget will determine your review cadence. As part of planning your salary bands, define what this cadence looks like for you as a People team and also for the business - how will you be rolling out any updated bands and when. (This is a big topic in itself! Keep your eyes peeled for upcoming blogs)

Knew all this? Have some shiny new salary bands you've just updated? Here's how Dotti can help: at the click of a button you can update your salary bands within Dotti so your talent acquisition team is always using the most up to date version. Sign up to the waitlist below.