Hi Friends,
Thanks to Mr. Sawant for replying regarding Internal equity and external competitiveness. However, I have come across new terms while working on a compensation survey. Could you please help me understand the following:
- What is Pay Compression?
- What is Broadband?
- What is Wideband?
These are pay scale terms used for determining the grade structure. Your advice on this would be greatly appreciated.
Regards,
Rashid Musa
From Saudi Arabia
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8Thanks to Mr. Sawant for replying regarding Internal equity and external competitiveness. However, I have come across new terms while working on a compensation survey. Could you please help me understand the following:
- What is Pay Compression?
- What is Broadband?
- What is Wideband?
These are pay scale terms used for determining the grade structure. Your advice on this would be greatly appreciated.
Regards,
Rashid Musa
From Saudi Arabia
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Gentleman,
Your questions are always welcome. You can talk to me over the phone at +966 507369480 for any inquiries related to strategic HR, compensation, and benefits issues.
For this post, the following explanation of the term referred to above is sufficient to understand what this is all about.
Pay compression happens when someone is hired for a job and they don't progress quickly in terms of pay. Most of the peers in the department tend to reach about the same pay range relatively quickly. Meanwhile, the market fluctuates. When a new person is hired, to stay competitive, the company may need to offer a higher rate than what most of the current staff is currently earning. Most companies do not adjust the entire department to align with the market. Therefore, it becomes necessary to leave the job to receive a satisfactory pay increase. Since many employers require pay history (and some verify that information), it may not be possible to leave and secure anything other than a lateral move. Ironically, I have seen many individuals make their most significant salary jump when they leave and then come back!
Pay compression can be a real issue in many organizations, leading to dissatisfaction among employees. It is essential for companies to address this problem to retain top talent and remain competitive in the market.
A Broad band is used to combine two grades into one.
A Wide band is used to combine three grades into one.
Regards,
Sawant
From Saudi Arabia
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Your questions are always welcome. You can talk to me over the phone at +966 507369480 for any inquiries related to strategic HR, compensation, and benefits issues.
For this post, the following explanation of the term referred to above is sufficient to understand what this is all about.
Pay compression happens when someone is hired for a job and they don't progress quickly in terms of pay. Most of the peers in the department tend to reach about the same pay range relatively quickly. Meanwhile, the market fluctuates. When a new person is hired, to stay competitive, the company may need to offer a higher rate than what most of the current staff is currently earning. Most companies do not adjust the entire department to align with the market. Therefore, it becomes necessary to leave the job to receive a satisfactory pay increase. Since many employers require pay history (and some verify that information), it may not be possible to leave and secure anything other than a lateral move. Ironically, I have seen many individuals make their most significant salary jump when they leave and then come back!
Pay compression can be a real issue in many organizations, leading to dissatisfaction among employees. It is essential for companies to address this problem to retain top talent and remain competitive in the market.
A Broad band is used to combine two grades into one.
A Wide band is used to combine three grades into one.
Regards,
Sawant
From Saudi Arabia
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I find your answers quite intriguing and amusing. As such, I have some comments/reactions to them, which I placed below your answers that I copied below:
Pay Compression
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 at 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.
Broadband and Wideband
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 methodology 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 is 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
From Philippines, Parañaque
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Pay Compression
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 at 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.
Broadband and Wideband
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 methodology 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 is 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
From Philippines, Parañaque
Acknowledge(0)Amend(0)
I have recently set up my company and am 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). For example, if there is a designation known as Customer Care Executive and there are three grades in that—maybe A, B & C—how are the compensations for these grades defined?
Regards,
Santanu Chatterjee
From India, Kolkata
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Regards,
Santanu Chatterjee
From India, Kolkata
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