The Truth About Salary Bands
In an effort to close the gender wage gap, California has passed a new law requiring companies to post salary ranges in job listings. This will help potential applicants know what they can expect to earn and give them more bargaining power during the negotiation process. Companies should take the time to understand their job market and how much they're willing pay for potential candidates. By doing this, you will eliminate any fear or hesitation that might keep people from applying for positions within your company--and get an advantage on those competitors who don't know what salary range is appropriate!
?You've probably heard of salary bands before, but do you know what they are and why they matter? Most companies have salary bands in place in an effort to control spending and stay within budget. A salary band is simply a range of pay that corresponds to a certain job title and experience. Within any given company, all employees with the same job title will earn within the same salary band. Salary bands exist to promote fairness and equity in pay among employees with the same title. They also help companies stay competitive when it comes to wages. Want to learn more? Read on!
1)?????Transparency, confidentiality, and the law
In 2003, when I was presented with my first raise at Ubisoft, the letter I was given was marked "Confidential." My understanding at the time was that this document contained sensitive information that I was not allowed to share with anyone. I was perplexed but didn’t know better, so I complied. I don't know if it still a practice there, but it is something very common.
In the United States or Canada, discussing salary is protected. This means that employees can talk to each other about their salaries without fear of retribution from their employer. This protection allows employees to negotiate for fairer wages and benefits. If you are reading from other countries, check what your rights are.
Inequalities in salary are a major source of frustration. Someone discovers that a recent hire is paid higher wages at the same level of responsibilities than them and suddenly, they become a flight risk. This said, jealousy and the knowledge itself coming from transparency can be an inevitable drain as well. On the upside, more transparency helps consistency and favors fairness, while motivating internal mobility. At the comp level, organizations that clean up their act are more likely to be successful and attract good and motivated contributors. A clean organization shows that the organization is reliable and trustworthy. It helps managers to sleep at night too. Enough said. ??
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2)?????Compensation changes – 3 pillars
There are more than 3 pillars of course, but from a company’s perspective, it can be viewed in terms of risk mitigation. It’s certainly cold blooded but should help you understand the underlying motives of most organizations, once removed culture and best intentions. What follows are merely general observations and are not meant to condone anything.
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Among other “pillars”, the obvious ones are
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3)?????Salary bands and market survey
There are many questions surrounding salary bands. Some believe that they stifle earning potential, while others believe that they help to create fair compensation practices.
My perspective on that is that salary bands are a tool to help globally understand compensation for a group of people. They also reduce discrepancies between people working in the same level/category. Salary bands say nothing about individual performance nor encourage initiative. They are basically a blind and imperfect tool.
Importantly, salary bands are set by surveying the market to understand what the industry is paying for similar positions. The goal is to ensure that you are competitive when attracting talents of course, and also that you are keeping up with the competition. By conducting regular surveys, businesses can keep their finger on the pulse of the market and make sure they are paying their employees what they are worth. It’s easier said than done in some fields like the video game industry, where jobs titles and functions aren’t normalized. Other sectors are easier to gauge, and various reports are available like McKinsey’s.
Specifically, salary bands will give managers visibility regarding an employee’s position within their “band”, compared to their “cohort” (Everybody being at the same level/function, as defined by the company). Basically, where they fit compared to the median of the band. Outliers can be highlighted to ensure that their situation is visible, understood, or accepted. Should it trigger a promotion? Is this person in need of a quick raise to bring them back within their cohort’s band? Etc…
Companies may fear disclosing salary bands as it could give an advantage to their competition. I am not suggesting to publish them as is. There are many ways to keep an edge when legally publishing ads. Broaden or mix categories to blend published rates. Mention an higher limit if you consider that a leading role could be considered too.
?Conclusion
Salary bands can help a business in a few ways. First, they create transparency and fairness among employees. Employers are able to see where they stand in terms of the market and what their counterparts are making. This also allows for employees to have a better understanding of where they fit into the company and whether or not they are being fairly compensated.
While salary bands can help keep spending under control and ensure that pay is fair and equitable, they can also limit your ability to attract top talent and cannot prevent 100% fostering resentment among employees.
Salary bands require companies to do market surveys in order to stay within compliance. From the managers’ perspective, this is an important step to ensure that they are offering competitive wages and benefits to alleviate flight risk or frustration.
Finally, salary bands will be key to companies’ competitive edge in the years ahead. As businesses become more globalized, or compete for talent across wider territories, it becomes increasingly important for organizations to find ways to attract and retain top talent. Offering salaries based on market data is one way of doing this.
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Have you been able to compile a comprehensive survey or have an experience to share? Let us know how it went!
Recent articles I wrote on a similar topic: