How Do I Implement an Employee Grading and Salary Structure in Construction HR?

Hi,

Good morning everyone.

I am an HR generalist at a construction firm. We are planning to introduce an employee grading system and salary structure based on it. Could someone please help me in this regard? If you have the format, please post the same.

Thank you,
Nadhiya

See the attachment. It may be useful. It was downloaded from CiteHR itself, but I don't remember whose post.

Dear adhiyapm,

I wish to suggest you plan as per your Company Rules and to follow based on:

A- By Designation Base:
1. Qualification + Experience + Job Knowledge
2. 50% to 70% of Gross Earnings can be set as Basic for different slabs as per the above (A-1) defined groups, and groups should be designated viz QEJ.
3. HRA can be made as 40% of Basic or 50% of Basic in cases where employees live in Metro Cities (to follow Income Tax rules).
4. Allowances can be set as per your Company rules ranging from any sum as n thousand for a grade and M thousand for a grade.
5. Conveyance can be set as a balancing figure to make the gross matchable with Total cost.

Hope the above may be useful for your purpose.

Regards,
HOS

Greetings all,

Dear Uddhav,

If you prepare the grade and salary structure, please do share the same with us.

Dear Nadhiya,

Please find below a brief on preparing grade structures and subsequently the salary structures:

Pre-Requisites:

1. Job Descriptions (Properly done based on Job Analysis. For more accuracy, you can follow methods such as Hays, etc., for JA).

2. Job Evaluation (Hays, Mercers, etc., or the Internal Method).

3. Corporate Vision and Business Strategy.

4. Know your Current Reward Mix.

5. Pay Position (Organizational capacity to pay based on Job Families, grades, etc.).

6. Market Survey (Identify competitors closely participating).

Steps:

1. Evaluate all the jobs/positions based on your current JE methodology and rate them.

2. Define if you want to have broad-band grades, single-step, or double-step. Currently, mid-sized organizations have 9-12 grades and further subgrades if necessary.

3. Once all jobs have been evaluated through a job evaluation system and the relative hierarchy or rank-order of all jobs has been established, cluster jobs of broadly similar job size into grades.

4. Define your pay position as per the company policy, whether upper quartile, median, lower quartile, etc. This may vary for different job families (technical vs. support jobs, core jobs, etc.), job locations, staff demographics, etc.

5. Define the reward mix in each grade.

Hope this helps.

Charu Jain

Hi!

The introduction of job grades and/or bands in an organization that will become the framework of an organization's salary structure needs many prerequisites. It is something that is better left in the hands of professionals like us who have been doing it for a long time. Simply copying certain models (like the one given above) will not be of much help because it opens up to many questions that must be answered. It can also create problems for the organization, which can jeopardize your job as compensation is a very sensitive subject matter. This is where your competence or incompetence can be uncovered.

Hence, if your organization really needs it, then allocate a budget and call the professionals.

Offhand, however, let me say the following:

1. Job Grades and Bands are not simply designed out of nothing. Whatever you design will mean a cost for the company. Hence, you need to understand the four basic compensation principles of internal equity, external competitiveness, affordability, and sustainability.

If you are a new company, you need the owner's pay philosophy and policy to be able to create a good and acceptable salary structure for them. If you are already operating, then you need the latest payroll list to see and plot the current salary ranges of the different job classes in your organization, i.e., executive, managerial, supervisory, staff, clerical, and admin support personnel.

2. Each Job Grade or Band must have the following elements: minimum rate, median rate, and maximum rate. These rates must be properly benchmarked with the current industry market where the company belongs so your pay will be competitive (external competitiveness). The rate ranges in each grade or band must be designed in a way that overlaps are rational, and distortion is avoided at all times. Overlaps are to be observed according to the basic theories we learned in the textbooks.

3. The entire salary structure must be designed in such a way that it is not only affordable to the company but is also sustainable by it for the long term (3rd & 4th principles).

I suggest that you attend a HayGroup or Watson Wyatt workshop on this subject matter.

Best regards.

Ed Llarena, Jr. Managing Partner Emilla Consulting

tel: 00966-54-223-7804 (KSA)

Hi,

Please suggest if there are any laws/rules governing the design of the employee grading system, or if it is solely at the company's discretion to create its grading structure. Should the designations be labeled as L01, G1, or Band 1, and should they follow an ascending or descending order?

Regards.

Hi!

I am not aware of any specific law that is attributed to any one person or organization that is universally accepted in the design of job grades/bands. In my employment and consulting work, I have seen so many types of "grading systems" that are uniquely designed. I have seen ascending and descending job grades. I have seen something like a rectangle chart which I called "the hundred-year salary chart". I have seen pure numbers (1-21), pure letters (a-m), mixed letters and numbers (cl1, so1). I have seen salary structures that have 12-22 job grades. I have also seen salary structures that only have eight (8) bands.

The guide to which type of design or model to adopt should be based on the available market data that is available in the area/country where a company operates. The reason is: you will have to benchmark your rates on a regular basis with market and industry rates to keep your structure updated and competitive. And, benchmarking will be difficult if your grading system does not match the system being used by the compen survey available in your area.

Example: HayGroup market survey uses their traditional 21-job grade system in all their surveys. Each job grade has its corresponding Hay Points Score that can only be obtained through the use of the Hay Profile Method of Job Evaluation. If your salary structure is designed using Broad Banding (and your company has only ten (10) Job Bands), you need to establish a "credible conversion system" from job grades to bands to be able to use the Hay Survey and benchmark with their data.

As a rule of thumb, salary structures must be designed using international systems (e.g., HayGroup and Watson Wyatt) for better understanding and easy benchmarking. Also, salary structure designs must be understandable and can be administered by others even if the employee/manager who designed it is already out of the company.

Never accept a design that only one person is able to understand. That will make your company dependent perpetually on that person. Remember, in an organization, no one (except the owner/s) must be indispensable.

Best regards from the beautiful City of Paranaque, Metro.

Ed Llarena, Jr.

Managing Partner

Emilla Consulting

Tel: 00632-828-9842 (landline)

(mobile)

Hi, please suggest if there are any laws or rules regarding designing the employee grading system. Is it up to the company to decide the grading pattern? Should it be termed as L01, G1, or Band 1? Should it follow an ascending or descending order?

Regards, Bhushan.

Hi! Please go to the previous page (page 1) of this discussion thread. The following is a copy of the first post:

The Introduction of Job Grades and Bands

The introduction of job grades and/or bands in an organization that will become the framework of an organization's salary structure needs many prerequisites. It is something that is better left in the hands of professionals like us who have been doing it for a long time. Simply copying certain models (like the one given above) will not be a good help because it opens up so many questions that must be answered. It can also create problems for the organization that can jeopardize your job because compensation is a very sensitive subject matter. This is where your competence and/or incompetence can be uncovered.

Hence, if your organization really needs it, then allocate a budget and call the professionals.

Offhand Considerations

1. Job Grades and Bands are not simply designed out of nothing. Whatever you design will mean a cost for the company. Hence, you need to understand the four basic compensation principles of: internal equity, external competitiveness, affordability, and sustainability.

If you are a new company, you need the owner's pay philosophy and policy to be able to create a good and acceptable salary structure for them. If you are already operating, then you need the latest payroll list to be able to see and plot the current salary ranges of the different job classes in your organization, i.e., the executive, managerial, supervisory, staff, clerical, and admin support personnel.

2. Each Job Grade or Band must have the following elements: minimum rate, median rate, and maximum rate. These rates must be properly benchmarked with the current industry market where the company belongs so your pay will be competitive (external competitiveness). The rate ranges in each grade or band must be designed so that overlaps are rational and distortion is avoided at all times. Overlaps are to be observed according to the basic theories we learned in the textbooks.

3. The entire salary structure must be designed in such a way that it is not only affordable to the company but also sustainable by it for the long term (3rd & 4th principles).

Best regards.

Ed L.

In the Compensation Lingo, a Job Grade and a Job Band refer to the same thing, i.e., the salary grade. However, the term "job grade" is more commonly used to describe the traditional grades of a salary structure that typically adopt between 12-22 job grades (e.g., Hay's Salary Structure design generally ranges from JG5 to JG24, encompassing a total of 19 job grades). On the other hand, the term "band" is utilized to describe the limited "salary grades" of structures that employ the "broad banding" method in salary structure design.

Broad Banding

Broad Banding refers to the practice of using a limited number of salary grades (e.g., 6-8) in the design of salary structures. These structures are characterized by "very wide rate ranges" within each grade and "substantial overlaps" between two bands (further details on this aspect have also been discussed earlier on page 1 of this thread).

Therefore, a common issue that arises in broad banding is "salary distortion" because certain positions that may have been evaluated and classified in a higher job band can receive a lower rate than some positions that were evaluated and classified in a lower job band when both positions fall within the overlap rates.

I do not provide samples on this matter, but I have undertaken projects in this area for prominent business organizations in Riyadh, KSA, such as FMHRC/SRMG, Team One/FedEx KSA, Fawaz Al Hokair Group, and SABB.

Regards,

Ed Llarena, Jr.

Managing Partner

Emilla International Consulting Services

Complexity in Construction Company Job Descriptions

A construction company has many verticals of work, such as roads, railways and bridges, buildings, industry, power and transmission, chimneys and silos, marine, ground engineering, and urban infrastructure, among others.

A civil construction company is essentially "site-based," with divisions like civil and structural fabrication and erection. The basic technical structure of a construction company is thoroughly supported by commercial departments like store, accounts, administration, and safety. Therefore, creating designation-wise "job descriptions" is a tremendously tough job, especially with specializations like chimney, marine, QA/QC, quantity survey, billing, and material reconciliation.

It requires considerable thought and effort to develop grades considering the factors above.

Regards,
Soumitra Sengupta

Categorizing/Grading of Every Employee's Designations

In an organization (manufacturing companies like steel, cement, sugar, power, chemical, mines, etc.), from Kalassi/Peon to GM/Director (i.e., unskilled to top management), it is an important task of the HR department to be done in such a way that every employee's qualifications, experiences, and salaries are taken into account to avoid complaints of anomaly later.

Also, it needs to be done carefully and properly so that the HR department staff, who have to prepare annual increments, promotions, fitment, benefits, etc., are able to understand the categorization to program it in the computer while making such increment and promotion orders with salary grades for hundreds of employees at a stretch.

The salaries are to be fixed for each grade/category/level in such a way that employees in each grade have a particular salary range/band in a descending order, say, from Director/President/GM down to the unskilled employees. Such categorization helps the HR department to group all employees from unskilled to top management, and it is required for HR, MIS reports, and for filing various returns. It will also help interview panel members to fix a particular candidate's designation in a grade matching his salary and post for the new candidate, considering his qualifications and experience vis-à-vis existing employees in the particular department to which the new employee is going to join/recruited, to reduce heartburn and anomaly problems among existing employees later.

Salary fixation for each employee (based on qualifications, experience, and job knowledge) is one aspect, whereas fixing his grade/category depending upon his designation is another.

Importance of Categorizing/Grading Employees

The second one, i.e., categorizing/grading/grouping, say hundreds of employees into various grades, is important to say how many engineers/officers, managers, mechanics are there at a particular time.

State laws require the filing of returns to the District Industries Centre, where the company has to state how many people of the particular state are given jobs, category-wise, say skilled, supervisor, etc. In Karnataka, every company has to file a KANNADIGAS report to provide statistics of Kannadigas employed in manpower returns quarterly.

I have attempted to categorize all employees' designations as follows (from unskilled to top management in XL format) so that every employee's designations in labor-intensive units like steel plants are covered in ascending order, starting with:

- Un-Skilled
- Semi-Skilled
- Skilled (Skilled - 4 Levels like Jr. Operator, Asst. Operator, Operator & Sr. Operator)
- Supervisory (4 Levels - Jr. Supervisor, Asst. Supervisor, Supervisor & Sr. Supervisor)
- Officers/Engineers (4 Levels - Jr. Officer/Jr. Engineer, Asst. Officer/Engineer, Officer/Engineer, Sr. Officer/Sr. Engineer)
- Managers (7 levels - Jr. Manager, Asst. Manager, Dy. Manager, Manager, Sr. Manager, AGM & DGM)
- Top Management (5 Levels - GM, Sr. GM, CGM, AVP, VP, CEO, President, Director, E.D. & M.D.)

However, the categorization, levels, and designations could be changed as per the organization's needs and nature of industries. The position is different in software and other types of companies compared to steel, cement, etc., as stated above.

As salaries will vary depending upon qualifications, experience, location, type of industry, etc., the same can be grouped to fit into appropriate grades. I request respectable Cite HR senior members to peruse the above and provide us (in a statement form) the types of categorization/grading of all designations available for the benefit of HR managers who need such a list not only for their work but also for convincing senior management whenever salary and designations are to be reviewed/re-fixed. Even though there may not be fixed norms for revision or change, it will be helpful if seniors provide some formats/guidelines which will show categorization/grading of all designations for better presentation, as there is a saying, something is better than nothing. This will help many HR professionals, just like standard quotations/specifications, comparative statements with rates for products like cars, bikes, etc.

I request Cite HR senior members to give more information on this important aspect of HR to help HR managers for categorizing the employees for various HR & MIS reports and also for recruitment teams.

Regards,
C.Neyimkhan, HR Consultant, Ex: AGM (HR&A), Hospet, Karnataka
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