Salary Bands: Why Sticking to Them Matters!

When Organizations Don’t have Bands

Employees don’t have a clear idea of how their pay is determined and how it compares to the rest of your staff, leaving room for misunderstandings and frustration. They often feel underpaid or frustrated when they discover that some people in your company are making inexplicably more money than it seems they should.

Salaries based on negotiation lead to workplace dissatisfaction, higher turnover, unhealthy competition

N, toxic workplace dynamics, and a lack of ambition.  

Relying on negotiation to determine compensation doesn’t just allow wage gaps; it fosters them. Many employees, particularly women and minorities, don’t feel comfortable negotiating their salaries, and those who do may face refusal or retaliation, as proven by several studies. 

What Are Salary Bands?

Very simply, they are ranges of pay for specific jobs. These should be broken down into different levels to account for varying experience, education, length of time working at the company, and results. There will be minimum and maximum salaries for that position and level, with various steps in the middle, depending on your needs. 

Why Salary Bands Matter

When people are informed, they feel respected and valued, crucial to employee engagement, retention, a strong company culture, and a productive, innovative team. 

 We all think and operate best when we’re informed about what we’re doing. Pay Bands empower employees with the knowledge to make informed decisions about their job, like knowing they are paid relatively or knowing there is the next level of pay available to them if they plan accordingly. Imagine video game levels. These levels exist to motivate players to move forward and choose what to do to make that happen, and accurately assess what they need to do to make it happen.

How Do You Create Your Salary Bands?

Well, you’ll need to consider several factors:

  • What you’re currently paying your employees
  • What you’re able to pay
  • Your Recruitment and Employee Engagement strategy and goals
  • Market data (I like OptionImpact and Aon Radford)

Creating bands takes some work, but it is worth it to take the time to do this right.

The compensation bands you create need to align with your hiring goals. 

If you’re looking for top talent, your salary ranges need to be competitive enough to reflect this. If you need loyal innovators, you need a clear structure to empower them with the information to fuel their natural drives to succeed. Of course, in tech, you want both of those things!

Businesses have become increasingly aware of the need for pay equity, diversity, and employee engagement. Over in the states, states are creating new regulations prohibiting asking applicants about their pay history, and many of them now require salary ranges to be listed in job postings. As compensation bands become prevalent, they are vital in staying competitive and attracting top talent.

The Most Common Question Founders ask me is whether they can win talent without negotiating.

The answer is yes, but not all the time! If you do not negotiate, you may lose some talent as we are all hiring in a competitive market. However, my own experience at Properly and recent studies have shown that employees are more likely to stay and join companies that prize compensation equity and take a transparent and fair approach to compensation. I often find that explaining why we have pay ranges helps me win candidates, as they know they will be treated fairly.

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