What is a salary band?

Salary bands should be part of your overall compensation strategy as an organisation. Jobs that are of a similar nature are grouped together in a salary band; you should look at which jobs in your organisation have crossover attributes. Ideally, you will have a salary band that covers all of the jobs in your organisation; for instance, it could be based on:

• The experience of the employee
• The job specification
• Their education
• Where in the UK the employee is working
• The nature of the hours they are working, such as if they are working ‘unsocial hours’

For example, your employees in an administrative role may have differing levels of experience and authority, so they would each be part of salary bands corresponding to the work that their role entails.

Establishing pay ranges for a role

Next, you could consider establishing a pay range for each pay band. Salary bands have the potential to offer a great deal of flexibility, as each band has a minimum and maximum wage range. They are usually offered during the recruitment process but can be adjusted at any given time.

You might also want to establish pay ranges based on your current budget and the philosophy of your company. If your business is new, and you have an income that is variable, you might want to have a narrow base salary that you adjust once your income is more stable, with any additional benefits, such as bonuses, included to incentivise staff.

You may want to offer employees a pay rise after becoming more experienced in their role. There is a lot of room for growth in the tech industry, for example. The average salary of an experienced back-end developer is £63,048 a year, but they may start on a much lower base salary. The pay range for a back-end developer is a lot wider than for some professions, as there is a lot of room for development. Although an experienced and less experienced back-end developer might have the same core skills, an experienced back-end developer will know more about programming languages, for example. Broad-banding in this way means that there is less hierarchy and allows for more flexibility. In this case, you might also want your salary bands to overlap somewhat.

Roles in less competitive industries, or jobs that are overall less specialised, may have a much narrower pay range. This is the more traditional route for businesses, as it creates a more stratified relationship between the different roles in a company. This kind of banding is often found in public sector roles, but it is useful in that it preserves salary equity and is easily adjustable to the market.

Although there is not such a wide salary band as in tech roles, there is still some incentive for progression. There are often high-cost area supplements available to those working in London. You may wish to increase an employee’s pay without giving them a promotion, and you could choose do so within the range of their salary band.

How to use pay ranges when recruiting

When recruiting, it is important to ensure that the pay ranges you offer align with the current job market. This is because the job market sets salary benchmarks; having a current pay range will enable you to compare the salaries of employees doing a similar job to those in the current market.

It is important to stay up to date with recent market data before specifying a pay range to gain a sense of the current ranges on offer. Even after recruiting someone, you may need to assess your salary bands every one to two years to keep them in line with the market. After all, it may help your position stand out to future employees, making it clear that you offer good compensation for their hard work.

If you work in a highly competitive, specialist industry such as the tech industry, you may consider making your offer competitive with lots of perks, such as flexibility and overtime pay. The average salary of a software engineer is £49,280 a year, for example, but you may decide to adjust their pay slightly based on the programming languages they know, such as Python, JavaScript or SQL. It is also worth tailoring their salary to the cost of living in the job location. For employees in the tech industry, a wide salary band may encourage them to apply to your open roles, and you may have a better chance of retaining staff as they become more experienced.

Using salary bands in career progression

Salary bands allow managers to control their budget while being able to compensate or reward employees who are performing well, or are taking on a more specialised role within the organisation. As salary bands correspond with the responsibility, specialisation and experience of each employee in your organisation, you can use them to more easily assess whether an employee has progressed in their role. Employees with larger workloads, more responsibilities or more developed skills may receive higher pay. If an employee moves up a salary band, it is important to note that this does not always result in an increase in salary; rather, it will increase the maximum of their salary potential.