Using a pay grade or salary grade scale, new hires are assigned to a specific pay level according to their level of education and relevant work experience. In an effort to balance internal and external equity, each job within the organization is assigned a specific pay grade.
How pay grades work
The amount of money someone makes at their job is determined by pay grades, which use predetermined factors. These elements influence how steps and levels are organized in company compensation charts. The tables list job titles along with the precise salary or range for each position. The precise compensation a person receives within the range shown on the charts is typically determined using a particular point system. Here are two pay grade components that influence how preset compensation operates:
Salary step guides
The actual grids or charts that reflect grade pay are known as salary step guides. In a grid, each cell or block represents a particular job and job level. The grid displays the levels that a person with a particular job can advance to. It also shows the precise salary that person should anticipate receiving at each level or step.
Job families
A job family is a collection of related positions held at one company. Some businesses decide to use a single salary scale or step guide for all of their positions. Some businesses decide to categorize employees into two or more job families, then produce distinct salary guides or step guides for each of those groups. For instance, a sizable business might decide to have distinct salary guides for its C-suite executives, sales professionals, and employees in all other functional areas. Salary guides are frequently made easier to read and navigate by grouping them by job family.
What is grade pay?
The amount a person is paid in full under a pay grade system is known as grade pay. This kind of payment system is predetermined and structured; salary negotiations are not permitted. There are several steps or levels in pay grade systems, and each has clear requirements. All employees have access to information about these predetermined salaries, levels, and steps, and the general public frequently has this information as well. The two most popular design structures for pay grade systems are as follows:
Who uses pay grades?
Public service careers, positions in government, police systems, uniformed services, and all six branches of the military frequently use preset salary step guides and pay grades. The use of pay grades and salary guides has also been adopted by many private organizations and unionized industries due to the numerous social and financial benefits of using this form of compensation.
Factors that impact steps and pay on a salary guide
Which elements affect the step or level a person is assigned is decided by specific businesses, unions, or governmental organizations. All pay raises related to those factors must be shown in the step guide or pay grade chart. Here are five things that can occasionally increase someone’s salary or step:
Education
When it comes to salary guides, education typically refers to the degrees or credit hours a person has earned. Occasionally, this category also includes special certifications. Each step of the ladder or grid’s pay scale is increased by having these degrees, credits, or certifications. A person with a master’s degree might earn $49,000 per year in the same role and step as a sales representative earning $46,000 annually according to a salary guide.
Experience
Prior to joining a company or workplace, a person’s experience is the number of years they spent working in a position that was similar. In some businesses or sectors, all employees begin on the first rung of the salary scale for their position or family of positions. Others base someone’s starting level or step on their experience. For instance, if a new teacher begins their first position at a school, their pay grade will be the same as the starting pay in the guide. However, if a teacher with five years of experience joins the staff at that school, their pay will probably match the amount listed in step 5.
Rank
In an organization, authority is identified and determined using the rank system. In the military and other uniformed services, ranks are used to indicate a person’s assignment, professional accomplishments, or unique skills. A person’s position on a pay grade or salary guide is frequently influenced by their rank. Let’s use the United States Army’s pay scale as an example. A Lieutenant with the same number of years of experience earns a base salary of $59,774 per year, compared to a Private First Class’s base salary of $26,802 per year.
Years of service
Years of service are the length of time a person has been employed by a business or institution. In most salary step guides, a person’s years of service serve as the main factor in determining whether they advance in step or level. A person’s salary increases as they put in more time at work. An officer of the law, for instance, might begin their career at step one of their precincts guide and earn $51,900 annually. Their annual compensation would be equal to the wage indicated on step six of that guide if they worked in the same place and capacity for six years.
Performance outcomes
Performance outcomes refer to a person’s ability to meet or exceed quotas or the caliber of their work. Public sector salary guides rarely include performance outcomes, but private sector pay grade scales or levels do on occasion. In these situations, a person’s quality of work may have an impact on their pay and where they fall on the salary scale.
Five benefits of having pay grades
Five advantages of having predetermined pay grades and salary guides are as follows:
How to create pay grades
When determining pay grade amounts and constructing pay grade charts, follow these six steps:
Example pay grade charts
Here are three example pay grade charts for your review:
Example 1
Take a look at this nine-step pay scale, which illustrates how an employee’s salary varies with experience, length of employment, and degrees attained:
Step**Bachelors Degree**BA + 30**Masters Degree**MA + 30**PhD**(1) 1 years $42,500$43,500$47,500$48,500$55,500(2) 2 – 3 years$44,000$45,000$50,000$52,000$60,000(3) 4 – 5 years $46,500$48,500$54,000$58,500$66,000(4) 6 – 7 years $51,500$54,000$59,500$65,500$71,500(5) 8 – 9 years $53,500$56,000$64,000$69,000$79,000(6) 10 – 13 years $57,000$59,500$68,500$73,000$84,500(7) 14 – 17 years$60,000$63,000$71,000$76,500$89,000(8) 18 – 21 years$63,500$66,500$74,500$80,000$95,000(9) 22 + years$65,000$69,500$77,500$83,500$99,000### Example 2.
An eight-step pay scale that illustrates how employee compensation varies by job family, level of experience, and length of employment is provided below:
Job Family**Step 11 – 3 years**Step 24-5 years**Step 35- 7 years**Step 48- 9 years**Step 510- 12 years**Step 513- 14 years**Step 615- 17 years**Step 718- 19 years**Step 820 + years**A$46,000$48,500$51,000$54,000$58,500$61,000$64,500$67,000$70,000B$54,000$57,000$60,000$65,500$70,000$74,500$80,000$84,500$92,000C$75,00$79,000$84,000$90,500$97,000$104,500$110,000$116,500$122,000### Example 3.
This seven-step pay scale chart displays employee compensation in relation to job family, educational background, work experience, and length of service with the company:
Job Family**Step 11 – 3 years**Step 24 – 8 years**Step 39 -12 years**Step 413 – 15 years**Step 516 – 18 years**Step 619 – 22 years**Step 723 years**Group 1$28,900$32,100$35,300$40,000$45,600$51,100$56,600G1MA$30,000$34,900$39,800$46,800$53,400$57,800$
Pay Grades and Ranges
FAQ
What is the definition of a pay grade?
A level of compensation for work that is defined as reflecting responsibility and authority. A managing director at Goldman Sachs once told me that “people listen to you regardless of your pay grade.” “.
What does grade pay means in India?
Suppose an employee’s basic pay is between Rs. 15,600- Rs. 36,900 and grade pay is Rs. 5. 400. This indicates that the basic salary will always be fixed between these two amounts.
