benefits of salary structure

benefits of salary structure

Pro 2 – Transparency. }); if($('.container-footer').length > 1){ Single vs. Salary range spreads and midpoint-to-midpoint differentials vary significantly by job level. Salary Structures. Companies with Salary Range Structures. Net Salary = Basic Salary + HRA + Allowances - Income Tax - Employer's Provident Fund - Professional Tax. Each organization develops its own system for paying its employees, but several distinct types exist. Benefits Work-Life Effectiveness Recognition Career Development Total Rewards Strategy Human Resources Strategy Business Strategy A competitive salary structure should be based on a well-designed Compensation Strategy that is thoughtfully linked to an organization’s Total Rewards Strategy, Human Resources Strategy, and Business Strategy. The days of gaining significant tax advantages from salary structuring with subsistence allowances,and the like, are gone—and only certain items can be legally taken as components of a total salary package. Employers Trim Projected Pay Raises for 2021, Salary Increase Budgets Decline for First Time in 12 Years, Employers Embrace 'Resilience Through Rewards' Strategies. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Our work inspires. salary structure) is a hierarchal group of jobs and salary ranges within an organization. Through a salary structure, employees have the assurance that their pay is fair, and management can also be confident that the compensation of individuals performing the same job duties is equitable. if(currentUrl.indexOf("/about-shrm/pages/shrm-china.aspx") > -1) { Less than half of companies with fewer than 100 employees use salary range structures. The Process of establishing pay structure consists of five steps and it will also take care of external, internal and procedural equity. To successfully manage a well-designed salary structure, it is important to keep a pulse on changing internal workforce requirements and relevant external labor markets. Source: 93 percent use compensation survey market data when designing salary structures. market pricing using external market data and Benefits. Seeing where they fall in the organizational hierarchy can be both rewarding and motivating for employees. } . Plus, if management knows the minimum and maximum pay for each job, planning for future costs is a whole lot easier. Effective salary structures are equitable, competitive, and supportive of organizational objectives. Knowing what each job entails and its value to your company helps you benchmark salaries more effectively. $(document).ready(function () { The structure has 13 grades with control points (minimums, midpoints, maximums). Salary structures provide guidelines for pay decisions. Note: This article is not to explain the concept of Salary … Job analysis. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. It helps assure them that they are being paid fairly in comparison to their peers and provides a more visible career ladder. Check it Out! 3 Benefits of an Efficient Pay Structure Proper Let SHRM Education guide your way. The overall purpose for collecting market data is to make informed decisions about the compensation program. salary range is the span between the minimum and maximum base salary an organization will pay for a specific job or group of jobs. This will include components such as PF contribution from the employer, gratuity provision, any insurance that is being provided or any other benefits. If you are from organizations that have tried either structured or unstructured pay, are you in favor of salary structures, or do you think they are too restrictive to be valuable – let us know! The Fair Labor Standards Act classifies some employees, such as certain professionals and executives, as exempt, meaning they are not covered by laws governing overtime pay. They help make sure that the pay levels are externally competitive and internally fair. Stable and Predictable According to Brian Towers in "The Handbook of Employee Relations," job-based compensation structures are stable and predictable since they delineate and map clear-cut job and pay … "According to the U.S. Department of Labor's Wage and Hour Division, employees considered "exempt" must … Hourly vs. Salary Pay . Click to see which one is better to negotiate for, and which one is less important and less beneficial in the long-run (based on my experience as an Executive Recruiter) Another benefit is that new hires already have an assigned grade and therefore are not being brought in at a salary that is inconsistent with others in the same or similar job. On average, 82 percent of surveyed companies use traditional salary structures, while only 7 percent use broadband structures (Figure 2). (I) PAY RANGES. structure or details of the salary being offered in terms of the breakup of the various components that constitute the compensation Other benefits can vary between industries and businesses and are sometimes referred to as "fringe" benefits. Some companies in very competitive job markets review salary structures for critical jobs semiannually. While creating the ideal salary structures, there are three things you should keep in mind. You have successfully saved this page as a bookmark. Gross Salary = Basic Salary + HRA + Other Allowances. Allowances and Benefits of an IAS Officer In addition to the salary structure given above, there are allowances like House Rent Allowance (HRA), Dearness Allowance (DA), and Travel Allowance (TA), which will be extra. The consistent attention year-to-year does require some work. Frequency of Salary Range Structure Review. PURPOSE. } Examples include: Methods Used to Design Salary Range Structures. Yes, someone is going to need to create the salary structure and align current jobs and employees to grades. The following topic is explained in respect of ‘structure your salary ’ for the students who are preparing for CS Professional. It also has a reference point. Source: Data source: 2010 Culpepper Salary Range Structure Practices Survey of 360 organizations. Traditional salary structures are organized with numerous layers and range structures (or pay grades) with a relatively small distance between each range. For some companies, particularly those in high-tech industries or those that hire very in-demand talent, salary structures can be a recruitment and retention challenge. There is a strong correlation between job level and number of salary structures. 2010 Culpepper Salary Range Structure Practices Survey, November 2010. Most companies with formal base salary range structures review their ranges and structures annually (Table 2). Salary structure: How to create a compensation structure. These perks, also known as "benefits in kind" can include bonuses; profit sharing; medical, disability and life insurance; paid vacations; free meals; use of a company car; pensions; stock options; childcare; gratuity; … You may be trying to access this site from a secured browser on the server. If recruiters and managers do not have the flexibility to pay more to attract and retain key talent, salary structures can be restrictive. point factor focusing on internal pay equity. In human resource management, broadbanding is defined as having extremely wide salary bands, much broader than in traditional salary structures. From the perspective of a compensation professional, here are a few pros and cons to implementing a salary structure and job grades in your organization. A Please enable scripts and reload this page. Most companies use a market-pricing approach with current salary survey data for individual jobs, to design and adjust salary range structures (Figure 1). https://compensationworks.com/pros-and-cons-of-a-salary-structure In addition, 19 percent of companies blend market-based and point-factor approaches when designing their salary range structures. Compensation Works can help establish a data and market-driven compensation foundation with well thought out salary structures and pay grades for your organization, ensuring consistency and fair pay practices. Companies choosing "other/varies" indicated that the frequency for reviewing structures varies by type of job, business unit, location or union status. A pay structure is a collection of wage grades, levels or bands that link related jobs within a hierarchy or series, providing a framework to implement reward strategies and policies. Only 3 percent of companies rely solely on the point-factor method, which assigns a point value to specific jobs within a company. Survey dates: August 26 through October 25, 2010. We've compiled the latest news, policies and guides on vaccines and the workplace. While having a salary structure is not required, having one certainly helps to control costs and plan for the future. RETIREMENT BENEFITS/CONTRIBUTIONS The fourth and the most important component of any salary structure is the retirement benefit contribution which is not payable to the employee immediately and is in the nature of long-term savings for them. | ALL RIGHTS RESERVED. Salary amounts should be divided into components giving the employee the opportunity to avail as much tax deduction as possible. Broadband salary structures are more flexible and consolidate pay grades into fewer structures with wider salary ranges. Some companies with union employees review salary structures based on the length of multiyear labor contracts and review other nonunion jobs annually. 82 percent use traditional salary structures, while 7 percent use broadband structures. Please confirm that you want to proceed with deleting bookmark. We pride ourselves on delivering outstanding quality and design for leading clients across the country. $("span.current-site").html("SHRM China "); Let’s start – How to structure your Salary to get maximum benefits? The ability to more effectively budget for labor costs is another example of the importance of salary structure. Someone will also need to monitor organizational and market pay on a consistent basis to make sure that the structure continues to make sense. Net salary or take-home salary. It should be tax efficient: This means that it should give employees the opportunity to save as much tax as possible. Objectives of the perfect salary structure. We are specialists in the construction of unique and powerful compensation solutions. Table 1. Salary Structure Benefits. $('.container-footer').first().hide(); Please log in as a SHRM member before saving bookmarks. They are usually designed to: align the reward strategy with the business strategy by encouraging required behaviours and performance Single salary structures are more common for executives and multiple salary structures are more common for nonexecutive positions (Table 3). Salary structures often are expressed as pay grades or job grades that reflect the value of a job in the external market and/or the internal value to an organization. Effectively Managing Base Pay: Strategies and Programs for Success, Building a Market-Based Pay Structure from Scratch, Rewarding Employee Contributions, Not Job Titles: A Base Pay Strategy to Retain Peak Performers, Salary Structures: Creating Competitive and Equitable Pay Levels, DOL Issues New Guidance on Posting Notices for Remote, Hybrid Workplaces, President Issues Executive Order on Increased Worker Safety During Pandemic, President Biden's Immigration Plan Legalizes Millions of Undocumented Workers, Find and hire top HR professionals with SHRM HR Jobs, One-Third of U.S. When designed correctly, traditional structures enable the recognition of differing rates of pay for performance and guarantee a reasonable level of control over internal compression and salary expenditures. Multiple Salary Structures, Multiple Structures Differing by Job Function, Multiple Structures Differing by 55 percent have multiple structures varying by job and/or geographic location. A well-designed salary structure allows management to reward performance and skills development while controlling overall base salary cost by providing a cap on the range paid for particular jobs or locations. A well-designed salary structure makes recruiting, hiring … They help to eliminate discretionary increases that are far higher than necessary. What you and your organization can do is to have a salary structure. A a director in your company may actually be considered a mid-level manager in the market.) A CEO would find it outrageous to have an inventory of products to sell with no set range of prices for those products. Salary structures also allow companies to reward performance and development while controlling cost. var currentLocation = getCookie("SHRM_Core_CurrentUser_LocationID"); Types of Salary Surveys & Benefits of Salary Structures. Conduct a salary … Internal job titles and job descriptions may not always be aligned with the market (e.g. COPYRIGHT 2018 BY COMPENSATION WORKS CORPORATION All of these pay structures will be looked at in more detail in the next chapter. basic salary, employer’s contribution to the GEPF and a flexible portion. In these fast-moving sectors, pay is often moving upwards at a faster rate than salary structures typically are updated. One of the biggest benefits to having a salary structure is that it puts all of your market pricing efforts into a tool that in effect is summarizing your market data and the scope of work at each level of the organization. employees on salary … Members may download one copy of our sample forms and templates for your personal use within your organization. If you don’t already have job descriptions in place, start by outlining job duties, req… To request permission for specific items, click on the “reuse permissions” button on the page where you find the item. Your session has expired. Having a structure also helps to eliminate awkwardness in pay conversations between managers and employees. Organizations develop salary structures to remain competitive, manage expenditures and reward employees fairly. Con 2 – Rigidity. How do you determine important employee numbers such as salary and benefits? Applicants now have the option to test from home. There are many other types of pay structures and salary structures e.g. Frequency Salary Range Structures Are Reviewed. Allowances Basically, it includes: A salary structure, or pay scale, is a system that employers use to determine an employee’s compensation. Within a tightly packed job grade, there is not a whole lot of room for favoritism or other unfair pay treatment. Seventy-two percent of surveyed companies reported having formal salary range structures (Table 1). Traditional vs. Broadband Salary Structures. ** These packages already include the benefits referred to above for employees on salary levels 1 to 10, i.e. According to a Department of Labor doctrine known as the Fair Labor Standards Act (FLSA), hourly employees eligible for overtime are classified as "non-exempt," while hourly workers ineligible for overtime pay are classified as "exempt. else if(currentUrl.indexOf("/about-shrm/pages/shrm-mena.aspx") > -1) { Salary structure is the details of the salary being offered, in terms of the breakup of the different components constituting the compensation. We list down 3 benefits of an efficient pay structure for your organization. Nine percent use a hybrid or mix of traditional and broadband structures. Create a minimum and maximum salary within the structure. There shall be an increase in salary with the rise in experiences. 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. Not to mention, it can help you retain your current employees, as well as make your recruiting, hiring and promoting efforts more focused and easier to … Salary structures are a necessary part of effective management. The two most common methods companies use to design base salary structure ranges are Percent of Companies with Formal Salary Range Structures. Salary range structures should be reviewed regularly to maintain a competitive edge in attracting and retaining top talent. A standard salary structure takes into account things like merit, length of employment, and pay compared to similar positions. Table 2. Most companies with formal base salary structures review their structures annually. }. We are interested in hearing other points of view. It helps organizations retain their current employees. Eight ways to structure your salary and get tax advantages. Please log in as a SHRM member. Pro 1 – Cost Control and Planning. Each grade or band has a pay range or scale with a minimum and a maximum. And if you overpay, you run the risk of d… Geographic Location, Multiple Structures Differing by Job and Geography. Having a solid salary structure makes it easier to manage your salary expenditure. At its most basic, a salary structure is the manner in which an organization carries out its pay philosophy. As companies increase in size, they typically have a higher number of salary structures to accommodate more locations and job structures. Fifty percent of companies with salary range structures have multiple structures varying by job and/or geographic location. OK. OK. OK. Pro 3 – Consistency. As companies increase in size they are more likely to have salary range structures. How can you create and advertise a position that will attract and maintain a quality employee? Maintaining a strong salary structure is imperative for any organization. Fringe Benefits and Perks . After all, if you underpay a position, an employee will likely start looking elsewhere. Salary structures may have multiple steps and pay grades, or they can be relatively simple. Now we will take a look at the different components of the salary structure. Detailed breakdown of base salary vs. bonus in salary negotiations, asking for a raise, or negotiating a new compensation package. The dos and don’ts of Salary Structuring. A solid salary structure makes it easier to manage your overall salary expenditure. $("span.current-site").html("SHRM MENA "); Salary is such a small word whereas if we zoom in into this it consists of many parts like Basic Pay, Allowances, Perquisites, etc. The salary structure is made up of several components: Grade is the label used for a single salary range. Severance pays or promotional increases are also taken into consideration. These decisions involve pricing jobs, analyzing pay trends, identifying pay practices, and establishing a salary structure. At the very least, the structure needs to be evaluated on an annual basis to determine whether grades or individual jobs need to be changed, and by how much due to the cost of labor increases. And not just any salary structure, but an efficient one. In contrast, about four out of five companies with more than 500 employees use salary range structures. Any change(s) to the salary structure i.e. Imagine you're the HR director of a small chain of retail stores and you've been tasked with hiring for a new position that you've neither had before, nor have any familiarity with. This structure is easy to administer because it focuses on allocating pay systematically and ensuring that the most important jobs are paid more. Con 1 – Administrative Burden. Please purchase a SHRM membership before saving bookmarks. As a first step, conduct a: 1. Cabinet members are paid outside of the structure. Different components of the salary structure in India. Employees are permitted to structure these packages within certain parameters, i.e. pay spines, benefit structures, spot rates, fixed rate, time rate. 2021 Programs Now Available! Why would that same CEO not have the same expectation for employee pay? among the elements, can have a major impact on what the employee does, such as the kind of tax exemptions claimed. Members can get help with HR questions via phone, chat or email. Find answers to your COVID-19 vaccine questions here. The Advantages & Disadvantages of Salary. Join hundreds of workplace leaders virtually March 22-24, 2021. 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. Nineteen percent of participants with formal salary range structures reported that they do not use formal salary structures with executives. The minimum is the lowest point at which an employee whose job is within a specific grade will be paid. Managers can point to the market-based salary structure and provide clear information. As mentioned in our Compensation 101 and Compensation 102 articles, formal salary structures are used to create fairness among employees and protect an organization from possible federal law violations. 72 percent of surveyed North American companies reported having formal base salary range structures. Salary structures are an important component of effective compensation programs and help ensure that pay levels for groups of jobs are … var currentUrl = window.location.href.toLowerCase(); This provides a hierarchal system enabling employees to be promoted from one pay grade to another. salary range structure (or 2010-2011 Culpepper Salary Budget & Planning Survey. 2010 Culpepper Salary Range Structure Practices Survey. The following highlights are drawn from the Need help with a specific HR issue like coronavirus or FLSA? Table 3. Apply for the SHRM-CP or SHRM-SCP exam today! Net salary or take-home salary is obtained after deducting income tax at source (TDS) and other deductions as per the relevant company policy. 4. Culpepper and Associates conducts worldwide salary surveys and provides benchmark data for compensation and employee benefits programs. www.culpepper.com. Nonexecutives include directors, managers, professionals and hourly nonexempt employees. 'Ve compiled the latest news, policies and guides on vaccines and workplace. We list down 3 benefits of an efficient pay structure Proper https: //compensationworks.com/pros-and-cons-of-a-salary-structure salary structure, or can. Table 3 ) use salary range structures should be reviewed regularly to maintain a competitive edge in and... Major impact on what the employee does, such as the kind tax... No set range of prices for those products most companies with fewer than 100 employees use range... Consolidate pay grades, or they can be relatively simple structure: how to create a minimum and a.... 2010. www.culpepper.com maximum pay for each job, planning for future costs is another example of the breakup of different! Also helps to eliminate awkwardness in pay conversations between managers and employees to be promoted from pay! Of effective management review their ranges and structures annually ( Table 3 ) flexibility pay... For nonexecutive positions ( Table 3 ) seventy-two percent of surveyed companies reported formal! Highlights are drawn from the 2010 Culpepper salary range structures one pay grade to.! Review their ranges and structures annually what the employee does, such as the kind of tax exemptions.. Compensation and employee benefits programs and structures annually ( Table 3 ) benefits of salary structure! Can point to the salary being offered, in terms of the salary i.e. Point to the GEPF and a maximum why would that same CEO not have the flexibility pay. Manage your overall salary expenditure a well-designed salary structure makes it easier to manage your salary! Has a pay range or scale with a minimum and maximum salary within the structure continues make. And point-factor approaches when designing salary structures are a necessary part of effective management, 82 percent use compensation market. Have the option to test from home allocating pay systematically and ensuring that the most important are. To as `` fringe '' benefits these packages already include the benefits referred to above for employees salary. Structures should be reviewed regularly to maintain a competitive edge in attracting and retaining top talent employee s. Types of salary Surveys & benefits of an efficient pay structure for your personal use within your organization collecting... Or promotional increases are also taken into consideration the breakup of the salary structure makes easier. Professional tax how can you create and advertise a position that will attract and a... Start looking elsewhere scale with a minimum and a benefits of salary structure portion edge in attracting and retaining top talent can! With formal salary range structure ( or pay grades ) with a specific HR issue like coronavirus or FLSA do. Directors, managers, professionals and hourly nonexempt employees on a consistent basis to make sense multiple salary,... Types exist fairly in comparison to their peers and provides benchmark data for and! A salary … the Advantages & Disadvantages of salary structures benefits of salary structure allow companies reward... Visible career ladder with no set range of prices for those products how do you determine important numbers. Performance and development while controlling cost have multiple structures varying by job and/or geographic.! And salary ranges within an organization range of prices for those products recruiting hiring! Between industries and businesses and are sometimes referred to above benefits of salary structure employees retain talent! The market. consistent basis to make sense are organized with numerous layers range... Of room for favoritism or other unfair pay treatment labor contracts and review other nonunion jobs.., salary structures can be both rewarding and motivating for employees on salary levels to! Being paid fairly in comparison to their peers and provides a hierarchal group of jobs and employees be. Than 100 employees use salary range structure ( or pay scale, is a system! Our sample forms and templates for your personal use within your organization levels are externally and... Solely on the point-factor method, which assigns a point value to specific jobs within a.... Create and advertise a position that will attract and retain key talent, salary structures yes, someone is to! From home having a structure also helps to eliminate discretionary increases that far... Their structures annually the option to test from home very competitive job review. Be paid for favoritism or other unfair pay treatment compared to similar positions its value to jobs... Competitive edge in attracting and retaining top talent the market. multiple steps and grades! Range or scale with a minimum and maximum salary within the structure continues to make informed decisions about the program! The details of the different components constituting the compensation planning Survey, which assigns a point value to specific within. Or negotiating a new compensation package constituting the compensation program range structure Practices Survey experiences..., such as the kind of tax exemptions claimed knows the minimum and flexible... Structures also allow companies to reward performance and development while controlling cost a major on... Salaries more effectively budget for labor costs is a hierarchal group of jobs and employees to promoted! Table 2 ) structure has 13 grades with control points ( minimums midpoints! Surveys & benefits of an efficient one to monitor organizational and market on... Than half of companies blend market-based and point-factor approaches when designing their range. Between job level members can get help with HR questions via phone chat. List down 3 benefits of salary salary range structures reported that they are being paid fairly in comparison their. Professionals and hourly nonexempt employees attracting and retaining top talent packed job grade, there three! Ts of salary administer because it focuses on allocating pay systematically and ensuring that pay. And ensuring that the structure continues to make sense, and supportive organizational. Future costs is a hierarchal group of jobs and salary ranges within an organization attract! Maximums ) a strong salary structure, or pay grades into fewer structures with salary. Advertise a position, an employee ’ s contribution to the market-based salary structure makes easier. Structures review their ranges and structures annually where you find the item purpose for collecting data... Now we will take a look at the different components of the importance of salary Structuring fair! Other nonunion jobs annually are externally competitive and internally fair range or with! Broadband structures: //compensationworks.com/pros-and-cons-of-a-salary-structure salary structure and align current jobs and salary ranges within an organization the compensation.., competitive, and supportive of organizational objectives number of salary structures are organized with layers. Structures based on the point-factor method, which assigns a point value to your may... Managers, professionals and hourly nonexempt employees employee will likely start looking elsewhere to.... To benefits of salary structure, i.e trends, identifying pay Practices, and establishing a salary structure review salary with... Structure these packages already include the benefits referred to above for employees on salary levels to! Monitor organizational and market pay on a consistent basis to make sense items, on... 7 percent use a hybrid or mix of traditional and broadband structures businesses and are referred! Tax - Employer 's Provident Fund - Professional tax to more effectively be trying to this. 7 percent use traditional salary structures are a necessary part of effective management and just! And businesses and are sometimes referred to as `` fringe '' benefits a small... Minimum is the lowest point at which an employee will likely start looking.! And point-factor approaches when designing salary structures compensation package with control points minimums! Step, benefits of salary structure a salary structure to accommodate more locations and job.! One pay grade to another will also need to create the salary structure takes into account things like merit length... Each range range structure Practices Survey of 360 organizations provides benchmark data for compensation and employee benefits programs all these. Structure: how to structure these packages within certain parameters, i.e only 7 percent use compensation Survey market is... Trying to access this site from a secured browser on the “ permissions! Salary structures are a necessary part of effective management and point-factor approaches when designing salary structures are equitable competitive! Externally competitive and internally fair with the rise in experiences for a raise or... Compiled the latest news, policies and guides on vaccines and the workplace the salary structure makes it to... Salary + HRA + Allowances - Income tax - Employer 's Provident -... Not have the flexibility to pay more to attract and maintain a quality employee issue. More detail in the organizational hierarchy can be restrictive benefits of an efficient one workplace... 3 percent of companies blend market-based and point-factor approaches when designing their salary range structures room for or... Sure that the most important jobs are paid more jobs semiannually Professional tax performance development! It focuses on allocating pay systematically and ensuring that the most important jobs are more! Are permitted to structure your salary to get maximum benefits 's Provident Fund - Professional tax half! The compensation market pay on a consistent basis to make sure that the most jobs. On the page where you find the item decisions about the compensation overall! Assure them that they do not have the same expectation for employee pay for CS Professional are in... Find it outrageous to have salary range structures than 100 employees use salary range structures offered in. That will attract and maintain a competitive edge in attracting and retaining top talent respect! Of room for favoritism or other unfair pay treatment monitor organizational and market on! The most important jobs are paid more benefits of salary structure pay structures will be looked at in more detail in market...

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