Human Resource Management

HRM Guide UK HRM Guide USA HRM Guide World About HRM Guide Student HRM HR Updates Facebook
Search all of HRM Guide

How to Establish a Salary Range for Your Employees

Salary Range

December 28 2019 - As an employer, you'll need to establish a clear set of salary expectations for existing or prospective employees. But what is a salary range?

A salary range usually has a minimum and maximum pay rate for a given role. In order to set an appropriate salary range for your business, you need to look at a number of factors including industry and market research, competitor information and labour market expectations.

As you will see from the tips below, it is not an exact science and can sometimes be at the mercy of many social and economic factors. But where do you start?

The Benefits of Knowing What Is a Salary Range

You want to build your work culture from the ground up, meaning a fair and robust salary and benefits package is a must to attract and motivate employees.

Happy, engaged employees will help you achieve your business goals. A chaotic salary structure that solely rewards individual performance or longevity, is going to create friction.

Make sure your salary strategy enables your HR department to achieve the goals you set them. Low pay and little career development will lead to a rapid turnover of employees of low quality.

Don't overpay either, this might get some talent through the door but will eventually become economically unsustainable.

Define Your Job Roles

Look closely at job roles. What level of education and work experience is needed to fulfill the responsibilities of the role? You can start by making sure you track employee hours.

By recognising the levels of knowledge, effort, and skill you need, you'll be less likely to set your rates too low, and not attract the right calibre of candidates.

Set Out Your Business Philosophy

If you operate in a sector that is seasonal or a start-up. You may want to look at how you will set up your salary ranges to mitigate this. Will you pay a set salary every month, or set a lower base salary with bonuses paid according to individual, team or company performance.

Performance-related pay is also common in some sectors (especially sales). In this system, high performers will benefit and underperformers will not see much financial reward above their base salary.

Look at Current Market Rates

There is a great deal of information on market pay available to benchmark against. These will show salary ranges for similar roles and sectors in the same regions.

Take a look at job advertisements in your industry (in particular, your competitors). Look at the salary and benefits being offered.

Executive-level salary ranges are usually the largest allowing for flexibility within the role as these leaders often make the biggest decisions affecting a company. Whereas salary ranges for lower and entry-level positions are the narrowest.

It makes sense to have some overlap in your ranges as this will allow you to provide career development without having to promote someone in order to give them a higher salary.

Don't set your salaries too low, or you won't attract the best talent. Be realistic with your budget and expectations. You won't attract the very best with a below-market rate salary. If you are lucky enough to attract those with potential into junior positions, they will not stick around for long.

The employment market will have a huge impact on your business. If unemployment is low, there is less talent available in the jobs market, and you will have to raise salaries in order to attract it away from their current roles.

Look at the Cost of Living

It's a fact of life that some places are much more expensive to live in than others. If you are based in a big city or metropolitan area, then the cost of living can be very high in comparison to other areas of the country.

If your company is based in one of these metropolitan areas, you will need to set your salary ranges accordingly, or you will have little chance of attracting the right candidates.

Alternatively, if you are based in an area that has a relatively low cost of living, then you can lower salary ranges to reflect this.

Consider Your Other Employee Benefits

Millennials and Gen Z are making up an increasing proportion of the workforce. Unlike older workers, salary isn't the be-all and end-all of attracting talent.

You can use this to your advantage to create a range of benefits that will create a happy and motivated workforce.

Look at providing a robust benefits package such as health, discounts, holiday entitlement, parental leave, flexible and remote working. By doing this you could pay less in salary but still be an attractive proposition to potential employees.

Communicate the value of these benefits at all stages of your recruitment process.

Be Flexible

Employees and candidates will try and negotiate what is a salary range for their position. You should expect this. If an employee can effectively demonstrate their worth to your business through continued exceptional performance, you would be unwise not to recognize this.

That's not to say you should always give in to demands, but should be willing to at least meet them in the middle to recognize their contributions. Employee loyalty should not be underestimated.

If you're looking for more information on growing your business and managing your team check out the rest of our website. You'll discover countless resources and tips to help you get your business where you want it to be.


HRM Guide makes minimal use of cookies, including some placed to facilitate features such as Google Search. By continuing to use the site you are agreeing to the use of cookies. Learn more here

HRM Guide Updates
Custom Search
  Contact  HRM Guide Privacy Policy
Copyright © 1997-2024 Alan Price and HRM Guide contributors. All rights reserved.