There is however a number of drawbacks that need to be taken into account if you want to implement broad banding. The salary range is determined by market pay rates, established through market pay studies, for people doing similar work in similar industries in the same region of the country. Disadvantages. Advantages and disadvantages of pay-rate systems. Understanding the different types of compensation is essential if you are a compensation specialist, HR leader, payroll specialist, business owner or … While pay transparency has some benefits, it has some downfalls as well: If companies make pay ranges available (instead of specific salaries), they will be forced to pay salaries at the higher end of the range. The administrative overhead associated with the annual pay grades review and revision is a disadvantage of the system. Though there are obvious advantages to incentive-based pay, there are disadvantages as well. Before implementing a merit pay system, it's a good idea to review the advantages and disadvantages of this approach to your employees' compensation. Basic-rate systems. Related Assignments. These pay bands typically range from GS-1 to GS-5, GS-6 to GS-11, GS-12 to GS-13 and GS-14 to GS-15. Job evaluation and pay grading: You evaluate each job based on several factors, such as how it affects the bottom line, how difficult or dangerous it is, and … While a typical salary band has a 40% difference in pay between its minimum and maximum points, a broadbanding structure can cover more than double that between its low-end and high-end. The following are the most common methods used to establish pay scales: The going rate: You determine what other businesses in your industry and region are paying for similar jobs, and structure your pay accordingly. It gives employees salary ranges for other positions so they can pursue growth opportunities. What is a disadvantage of broad bands? One of the main advantages of salary transparency is that it encourages equal pay. Have your thoughts on salary structure changed after this exercise? When you select a pay-rate system, you are choosing how you will reward your workers. In addition to determining the number of bands and actual pay ranges, jobs must be placed within bands. For those who are getting Grade Pay of 1800, in the Pay Band of 5200-20200, next MACP fixation with Grade Pay of 1900 only is available, after putting 10 year service. Buffer’s founders wanted to avoid the common office politics that grow around salaries by making everyone’s pay common knowledge. Yet, through pay salary policies, companies and managers can work on their compensation plans, resulting in fair and justified compensation bands for all staff members. E) They discourage employees from gaining valuable experience through lateral career moves. Salary structures are an important component of effective compensation programs and help ensure that pay levels for groups of jobs are competitive externally and equitable internally. The job-based pay structure has been widely used by businesses because it links the job position directly to pay. National pay scales with additions for London/South East and ‘hot spots’: some organisations have added flexibility through the ability to pay more in labour market ‘hot spots’ outside the traditional high-cost areas. In the article, the follow questions will be answered: What is broadbanding? disadvantages of compensation. C) They increase the number of levels in the organization's job structure. What are your feelings on a traditional salary structure (many levels) vs. simplified pay bands? A) They reduce managers' flexibility in making assignments. Each pay band has a minimum and maximum pay. Select Page. Salary pay of such job is determined in accordance to the rate that is prevailing in the market for the same job or the number of people who are available to perform the same job. Businesses can use a variety of pay structures to compensate employees. Pay structures, salary bands and pay grades are the foundations of any reward strategy, with the next most common focus being the benefits that organisations can offer their employees. Organizations in information technology strategy planning Reference no: EM132536739 Your team will conduct a literature review in Information Technology Strategic Planning. However, there is a lot more to an effective reward system than these measurable details. Jobs that are equal in knowledge, competencies/skill criteria, decision-making, and degree of supervision should be grouped together. Within these bands, pay is based on employee performance. But she notes there is a pay gap when women and men’s salaries across the company are compared: women make 9.25% less than men on average. A ranking scale is a survey question tool that measures people's preferences by asking them to rank their views on a list of related items. Typically, each salary band will have many consolidated, smaller grades within it, usually with a range spread of 80% to 200% of the median. So also, the next Grade Pay applicable to them, after another 10 year service, Grade Pay is fixed as Rs.2000 with a raising Rs.100 only; this is the most disadvantage position now continuing. However, this structure has disadvantages because employers are limited in considering other factors that more accurately measures a worker's value. Merit pay has advantages and disadvantages for both employees and employers over a traditional pay system that puts the money in base pay. 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