Definition| A pay structure is a collection of pay rates or pay ranges.Structure setting and adjustment is the process of developing, adjusting, and maintaining a pay structure.|
Purpose| Pay structures are used to help organizations: * maintain pay levels that are competitive with the external labor market, * maintain internal pay relationships among jobs, * recognize and reward differences in level of responsibility, skill, and performance, and * manage pay expenditures.Structure setting and adjustment provides a systematic way to manage pay structures.|
Elements of a pay structure| A pay structure is defined by several elements, including: * coverage – the occupations, positions, or persons included, * the number of pay ranges or grades, * the differences between pay ranges, and * range width – the difference(s) between the range minimum and maximum. |
Types of pay structure| Common approaches to establishing pay structures include:| | Approach| Common characteristics:|
| Traditional (Grades)| * separate structures for each employee type (e.g., nonexempt, salaried nonexempt, exempt, executive), function, or occupation, * many ranges or grades (often 10 or more), * narrow ranges (15% – 50% for professional positions), and * small to moderate differences between grades.| | Broadbanding("Broad grades")| * separate structures by employee type, * relatively few ranges (4 to 6 bands are common), and * wide ranges (50% to 80% for white-collar non-managerial positions).Federal broadbanding: * maintains distinctions between developmental and full performance level positions, * may include technical and administrative support occupations, and * typically has more grades and narrower ranges than "pure" broadbanding.| | Career Banding| * one or few structures, * few ranges (4 or less), and * no or extremely wide ranges (150% or more).| | Market Pricing| * separate ranges for each distinct type of job, as defined by the external labor market (jobs and ranges, however, may be grouped for ease of administration.), * the absence of a coherent structure (systematic relationships between different jobs), and * narrow pay ranges, to keep pay levels closely linked to external labor markets.|
Structural vs. individual adjustments| Structural adjustments and individual pay adjustments are distinct.They may occur simultaneously, and may be equal, as is typical in the Federal Government. However, this is not necessarily the case. Many organizations adjust their salary structures, leaving employee salaries unchanged, and use a separate process to adjust employees’ pay.|
Examples| Examples of structure setting and adjustment include: * an organization conducts a salary survey and establishes a set of occupation-specific pay rates in response to labor-market pressure, * an organization increases the minimum and maximum rates for its pay ranges based on the employment cost index (ECI), and * an organization negotiates wage rates and future cost-of-living adjustments for bargaining unit positions.In each case, the action affects the salary structure, its coverage, or both.|
Federal history| Pay StructureThe Classification Act of 1949 created the General Schedule. By the early 1960s, the General Schedule had most of its present-day features, including: * range widths of roughly 30 percent, divided into ten steps, * grade intervals of approximately 10 percent for one-grade interval positions up to GS-11, and * grade intervals of approximately 20 percent for two-grade interval positions at grades GS-5 through GS-15.With the exception of the elimination of grades GS-16 through GS-18, there have been no significant changes since.Structural Adjustments Through the mid 1950s, structural (schedule) adjustments required legislation, and were made at irregular intervals. Since then, the Federal...