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Pay Strategy

To assist in the administration of compensation plans, most organizations utilize some type of formal "pay structure".  A formal pay structure provides the framework and formal structure for assessing jobs and grouping similar jobs together.  Factors used in grouping jobs within a pay structure often include:

  • Complexity
  • Responsibility
  • Level of supervision
  • Accountability
  • Organizational impact
  • Market value

The two most common forms of pay structures are "Grades" and "Bands".  The distance between the minimum and maximum of a pay range is called the "range spread".  Grades typically have very narrow range spreads, while Bands have very broad range spreads.  This has led to the commonly used term of "broadband" to describe the range of pay rates within a structure using a band approach.  

For those employees who were with Virginia Tech around 1999 - 2000, you may remember when the state switched from pay grades to pay bands.  Unlike the old pay grade system where an increase in responsibilities often meant a promotion to the next pay grade, pay bands represent a much broader range of different types of jobs and levels of responsibility.  As you can see in the illustration below, in a grade system Job “A” and Job “B” are in different pay grades.  However, in pay band system such as we currently have at Virginia Tech, Job "A" and Job "B" are in the same pay band.  Please notice however that even though the pay band is the same, there is still a significant difference in the target salary level due to the differences in the level of responsibility and job content of the two jobs.

The key points here are:
  • It is not necessary to be moved from one band to another in order to receive a significant salary increase, AND
  • Just because two positions have different levels of responsibility/complexity/etc., does not necessarily mean that they should be in different pay bands.
 
    Grade vs. Band Comparison