What Is Pay Compression, Broad Band & Wide Band - CiteHR
Ed Llarena, Jr.
Owner/ Managing Partner
Rajsawster
Hr Specialist - Policy,compehsation &
Rashidmusa
Compensation And Policy
+1 Other

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Hi Friends,
Thanks to Mr.Sawant for replying for Internal equity and external competitiveness.
But I come across new terms while working on compensation survey.
What is Pay Compression?
What is Broad band?
What is wide band?
These are pay scale terms used for determining grade structure please advise.
Regards
Rashid Musa

Gentleman,

Your questions are always welcome, you can talk to me over phone on +966 507369480 for any questions relating to strategic HR as well as compensation & benefits issues.

For this post following explanation of the term refrred above is enough to understand what all this about.

Pay compression happens when someone is hired for a job and they don't move forward very fast in pay. Most of the peers in the department gravitate to about the same pay range relatively quickly. Meanwhile, the market is moving up and down. When someone new is hired, to be competitive the company may need to bring the new person in at a rate that may be higher than what most of the current staff is currently making. Most companies will not adjust the whole department to make it more market-adjusted. Therefore it becomes necessary to leave the job just to get a satisfactory pay increase. And since many employers want pay history (and some check that info) it may not be possible to leave and get anything other than a lateral move. Ironically, I have seen many people make their biggest jump when they leave and then come back!

A Broad band is used to combine two grades into one.
A Wide band is used to combine three grades into one.


Regards,

Sawant

Hi!

I find your answers quite intriguing and amusing. As such I have some comments/ reactions to them, which I placed below your answers which I copied below:

You said:

"Pay compression happens when someone is hired for a job and they don't move forward very fast in pay. Most of the peers in the department gravitate to about the same pay range relatively quickly. Meanwhile, the market is moving up and down. When someone new is hired, to be competitive the company may need to bring the new person in at a rate that may be higher than what most of the current staff is currently making. Most companies will not adjust the whole department to make it more market-adjusted. Therefore it becomes necessary to leave the job just to get a satisfactory pay increase. And since many employers want pay history (and some check that info) it may not be possible to leave and get anything other than a lateral move. Ironically, I have seen many people make their biggest jump when they leave and then come back!"

Comments:

You're looking and interpreting "pay compression" from a mixed view of both individual and corporate frameworks. If a company has a good salary structure and jobs have been properly evaluated, it will not be correct to say that employees in a department "gravitate to about the same pay range", unless they have the same jobs and/ or job grade levels. Indeed, only jobs of the same sizes will have the same pay ranges because they belong to the same grade or band, whose minimum, median, and maximum rates have been properly determined in relation to market ranges.

You also said:

"A Broad band is used to combine two grades into one".

"A Wide band is used to combine three grades into one".

Comments:

Your definitions are both incorrect. "Broad Banding" in JE and Salary Structure Design does not categorically specify the exact number or quantities of job grades that it combines when used as a methodoloogy in designing a salary structure for a company. It is popularly understood as simply "the reduction of job grades", from the traditional "many" to a "few".

There is no such thing as a "wide band". When a certain salary structure's quantity of job grades are reduced by 50% or 75% of its current number, it is generally interpreted as having adopted the "broad banding" methodology.

Hope this helps.

Best regards.

Ed Llarena, Jr.

Managing Partner

Emilla Consulting


Dear All,
I have recently set up my company and is structuring the compensation packages now.
I would like to know if there is any set rule in framing the compensation according to designations and grades(bands).
Suppose if there is a designation known as Customer Care Executive and there are three grades in that ....may be A, B & C.
How are the compensation for these grades be defined?
Regards,
Santanu Chatterjee

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