Constructing a Pay Structure

  1. 1 Explain the concept of pay structures and the five steps necessary to construct pay structures.

Compensation specialists develop pay structures based on five steps:

  • Deciding on the number of pay structures

  • Determining a market pay line

  • Defining pay grades

  • Calculating pay ranges for each pay grade

  • Evaluating the results

Step 1: Deciding on the Number of Pay Structures

Most companies often establish more than one pay structure, depending on market rates and the company’s job structure.1 Common pay structures include exempt and nonexempt structures, pay structures based on job families, and pay structures based on geography. A large-scale survey estimates that approximately 37 percent of companies establish pay structures ...

Get Strategic Compensation: A Human Resource Management Approach, 9/e now with the O’Reilly learning platform.

O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.

Start your free trial