What is a salary structure?
A look at all the components that make up a salary structure
by Josh Doody
Before we talk about how to get a promotion or raise, we need to talk a little about how companies typically structure pay scales. This is important because it helps explain why all raises aren’t created equal. Sometimes, it’s really tough to get a 5% pay bump, and sometimes it’ll be relatively easy to get a 10% pay bump or greater.
So let’s talk about some common terminology and I’ll explain how salary structures work while we’re at it.
Jobs, job titles, and positions
A job is a set of responsibilities to be performed by an employee. That set of responsibilities is usually described in a “job description”, which you’ve probably seen before. Most jobs have a job title like “Consultant” or “Accountant” or “Senior Developer”.
For any given job, there might be multiple positions, which are “seats” available for that job. A company might have five or six Jr. Developers, for example.
A career path is a series of jobs in succession. For example, a typical career path for a Software Developer might be something like this:
Jr. Developer → Developer → Sr. Developer → Team Lead → Director of Software Development → VP of Software → SVP of Software → CTO → CEO
Pay grades (or paybands)
Most companies are structured so that each job has a pay grade or payband that describes the lower and upper ends of the pay range for that particular job. I’ll refer to them as “pay grades” from here on out because that’s the most common industry term.
Paygrades are usually labeled something pretty generic like “E01” or “F2” or even just “1”. Each job (Mechanical Engineer, Accountant I, Operations Manager) maps to a pay grade, and multiple jobs may map onto the same pay grade. For example, “E01” may translate to something like “New Engineer”, so “Electrical Engineer I” and “Jr. Software Developer” and “Mechanical Engineer I” may all map to the “E01” pay grade.
A pay grade is usually bounded at the lower and upper ends by a salary. The bottom of a pay grade is the minimum salary available to jobs assigned to that pay grade. The top of a pay grade is the maximum salary available to jobs assigned to the pay grade. The *midpoint *is the salary at the middle of the pay grade—half way between the bottom and top.
A salary structure is a way of describing a series of pay grades. It’s essentially a summary of various pay grades and the jobs they represent along with their salaries.
Here’s an example of a salary structure to show you what this looks like with a visual:
So, a Jr. Developer is in a pay grade named “E01” that goes from $60,000 (the bottom of the pay grade) to $80,000 (the top of the pay grade). Then a Developer is in a pay grade called “E02” that goes from $70,000 to $90,000. And a Sr. Developer is in a pay grade called “E03”, which goes from $80,000 to $100,000.
The pay grades are often pretty wide and have some overlap so that they look like a set of stairs if you graph them.
That example is totally made up, but is a good representation of a typical set of pay grades for Developers. And note that a Mechanical Engineer 1—an entry-level Mechanical Engineer—may also be in the E01 pay grade.