{"id":6588,"date":"2024-05-29T17:26:38","date_gmt":"2024-05-29T17:26:38","guid":{"rendered":"https:\/\/www.brightmine.com\/uk\/?post_type=resources&p=6588"},"modified":"2026-04-27T13:08:11","modified_gmt":"2026-04-27T13:08:11","slug":"pay-structures","status":"publish","type":"resources","link":"https:\/\/www.brightmine.com\/uk\/resources\/total-rewards\/benchmarking\/pay-structures\/","title":{"rendered":"Pay structures: What they are and how to use them"},"content":{"rendered":"\n
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by Natasha K. A. Wiebusch<\/strong>, Brightmine Marketing Content Manager<\/p>\n\n\n\n

A pay structure is an essential piece of any reward strategy. It helps an organisation plan its budget, establish reward priorities and compete with other organisations for key talent.<\/p>\n\n\n\n

Several types of pay structures exist, however, and it’s vital to choose the right one for your organisation. The type of structure that works for one of your competitors may not work for you.<\/p>\n\n\n\n

In this article, we review what a pay structure is, the common types of structures and how to navigate them in your own organisation.<\/p>\n\n\n\n

What is a pay structure?<\/h2>\n\n\n\n

A pay structure is how an organisation organises its pay to employees. It provides a systematic way for organisations to set basic pay levels or rates and pay ranges for individual jobs.<\/p>\n\n\n\n

At the global level, a pay structure reflects the way an organisation spreads pay across the organisation. At the individual level, it reflects how the organisation has organised its reward package (e.g., basic salary and bonus).<\/p>\n\n\n\n

Types of pay structures<\/h2>\n\n\n\n

The following are common types of pay structures to be aware of:<\/p>\n\n\n\n

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Individual pay rate<\/h3>\n\n\n\n

An individual pay rate structure, also called a spot rate, simply has one pay rate for each job role. This type of structure is usually used for unskilled occupations. Though an employer may increase pay over time, employees do not have a set structure for progression.<\/p>\n\n\n\n

Individual pay range<\/h3>\n\n\n\n

An individual pay range structure is very much like individual pay rates in that there is no formal structure for progression. However, an individual pay range structure sets a pay range for each position instead of a single rate. This provides the organisation with some level of discretion to set initial pay an allow for some progression.<\/p>\n\n\n\n

Narrow-graded pay structure<\/h3>\n\n\n\n

Under a narrow-graded pay structure, pay is organised into several narrow grades. Pay increases based on specific achievements, such as years of service with the organisation. Public entities and non-profits often use this type of pay structure, as they help employers control and predict costs. They’re also common in organisations that provide professional services. Narrow-graded structures usually have 10 or more levels (or grades).<\/p>\n\n\n\n

Job families<\/h3>\n\n\n\n

A job families structure groups job roles that have similar responsibilities and characteristics. This structure usually has six to eight levels, and pay progressions are based on increased skill level, experience or level of responsibility. In a job families structure, organisations have the flexibility to set pay for different departments and markets. <\/p>\n\n\n\n

Broadband<\/h3>\n\n\n\n

Like job families structures, broadband salary structures generally follow a graded pay scale and group jobs together based on shared characteristics. However, a broadband structure groups even more jobs together and has fewer pay levels (around five).<\/p>\n\n\n\n

As a result, a broadband structure generally has larger pay ranges. This offers more flexibility to employers to, for example, offer higher pay for high-value skills or priority needs. It also allows employers to give more pay increases over time without having to change an employee’s job title.<\/p>\n\n\n\n

Market-based<\/h2>\n\n\n\n

A marked-based pay structure focuses on competing with other organisations for talent. Under this structure, organisations set pay based on the market. That is, they leverage salary benchmarking data to determine what competitors are paying. Then, they set their own pay to be competitive with competitors in their market.<\/p>\n\n\n\n

Since the market-based structure allows the market to determine salaries, it’s best for organisations that are able to benchmark salaries often.<\/p>\n\n\n\n

Hybrid approach<\/h3>\n\n\n\n

Organisations can also use multiple different types of pay structures for different business areas or markets. Using multiple approaches is much more common in large organisations and organisations that have multiple unique functions or services. For example, and organisation may use a graded pay structure for a less competitive job role and a market-based structure for highly competitive role.<\/p>\n<\/div>\n\n\n\n

Benefits<\/h2>\n\n\n\n

Pay structures ensure pay aligns with the reward strategy<\/a> and help reward professionals make pay decisions efficiently and consistently. They also have other important benefits:<\/p>\n\n\n\n

Budgeting and planning<\/h3>\n\n\n\n

All employers want to offer competitive pay and motivating pay increases. However, they must also consider their own limitations. Pay structures help balance these two important factors by providing a clear view of total pay. They also help establish pay priorities within budget by setting pay grades, pay bands and pay levels.<\/p>\n\n\n\n

In addition to taking care of the bottom line, pay structures support efforts to plan for the future. That is, HR leaders need to prepare for both internal and external developments that may impact pay. This may include company growth, financial performance, changes in the economy (e.g., inflation), technological advances or new competition. With a well-planned structure, leaders can account for these changes in a competitive and responsible way.<\/p>\n\n\n\n

Talent attraction and retention<\/h3>\n\n\n\n

Competitive pay is still the most important factor employees consider when looking for a new job. Because of the influence pay still has on talent attraction and retention<\/a>, it’s paramount that employers get it right.<\/p>\n\n\n\n

Pay structures, together with market data, support this effort by providing a clear mechanism for setting competitive pay. For individual employees, it helps create competitive options that are within budget, motivating, and aligned with the reward strategy.<\/p>\n\n\n\n

Fair pay and transparency<\/h3>\n\n\n\n

Employee pay structures support consistent and objective pay decisions. By providing boundaries such as pay levels and maximum salaries, they ensure individual pay decisions don’t create outliers. For example, a set salary range ensures any approved pay increases stay within range for the job role.<\/p>\n\n\n\n

A structure also helps increase transparency by creating consistent salary ranges and maximums that the company can disclose.<\/p>\n\n\n\n

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See how you can create a winning reward strategy<\/h2>\n\n\n\n
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Learn more<\/a><\/div>\n<\/div>\n<\/div>\n\n\n\n

Challenges<\/h2>\n\n\n\n

Establishing the right pay structure is not without challenges. At the outset, it can be difficult to consider the many factors involved in creating or changing your structure. Important factors include the following:<\/p>\n\n\n\n