Hi Danielle

The grade or salary point should reflect the qualification or equivalent experience, required for the job. Otherwise you could have a doctor being paid large amounts for doing an admin role.

To answer the question in the OP: yes, I have, and I hate it.

Would your CEO like to put a value on an A Level in English Literature over a GCSE in Mathematics? What about a value on 3 years' CAD experience versus 7 years'? But what if the former's experience was in your exact industry but the latter's was only in a related industry? But what if the former also has a formal qualification but the latter doesn't?

What if next year your industry body de-recognizes the formal qualification?

What if, instead of trying to put a cash value on each and every criterion you just decide to make a judgement call on each person? But, obviously, you wouldn't want person A to know that person B is paid £2.5k per year more, because it's hard to explain why that's the case, because it was just a judgement call. Ah, but person B is a woman. Oh, but person A is from an ethnic minority group.

Quick! Don't tell anyone what anyone else earns!!

Yeah, because that's never a topic of conversation.

Long story short: the moment your business is moving out of the S and towards the M in "SME" you need to think about salary structure.

Whether you go with grades, bands or some other method will depend on your culture and aspirations. It's all very well for the CEO to say "but I HATE that". Try, instead, to get him or her to articulate what it is that he/she hates about such structures so you can tailor one that avoids or minimizes those issues.

Hi Danielle

A 10 "Grade" structure with 3 "grades" for the directors seems like an awful lot unless you are a massive organisation. It may well e that your new CEO is pushing back against the scheme bureaucracy of the structure and the inflexible attitudes that grading structures can give rise to.

I think that spot salaries can and do work and can make the organisation far more focused on what an individual delivers and what value they bring. Inherent in them are equal pay challenges so you need an excellent system behind it to support the salaries you are placing people onto. It becomes much harder to defend - but the risk "may" be worth it for the flexibility and energy it gives.

But I personally wouldn't build a structure just around experience / qualifications but around what they are doing for you.

In reply to Keith:

I’d agree totally with Keith that so very many salary grades and bands is unnecessary - almost imho to the point of insanity.

My own past experience is that almost any range of employees’ jobs fall into just a few broad levels of complexity / scarcity / responsibility etc - for example: junior admin; senior admin / supervisory; junior and middle managerial / functional specialist; senior managerial / directors.

That’s just four bands from top to bottom. If you stack them from bottom to top in appropriately-broad bands, you should be able easily to accommodate everyone, both almost by common sense into the appropriate band and then you have a lot of leeway because it’s broad in range as to both where to place them therein and future headroom.

We are just about to embark on job evaluation, banding and pay grading!!

We currently have a system where people have been paid what managers have thought they should be paid, with a lot of discontent in the business over 'my job is more important than theirs', 'I have more skills than them', etc, and I think a clear structure will allow us to remove that.

It will provide transparency and justification for the salaries we pay.

We are going to try to minimise the number of bands, as I agree, 10 is a lot. Perhaps a more simplified structure with room within the grades to allow some options of salary based on the experience and qualifications (if these are required for the role).

By removing a grading system, Robey rightly points out you are at risk of equal pay issues.

Hi Danielle, my guess is, it will be unlikely that you will find a lot of experience out there of the sort of system that your CEO desires, and that in itself is probably saying something (as Robey's 'hate it' experience of something like this seems to indicate) - indeed, you could even ask your CEO if they have come across any such system in their own career path ... and if so, were they 'happy' with it !

The message back to the CEO probably needs to be along the more practical lines of "the job to be done for the business/organisation comes first, the qualifications/experience are then attached to it" - if you try and set up a new salary system on the basis of the latter rather than the former, I think you'll experience problems with 'equal pay for work of equal value', transparency, etc (and your CEO will then have a different 'hate' to deal with if those problems arise) and anyway, there will have to be a 'system' in place one way or another with its own distinct categories, ranges, etc, so you may well end up just replacing one system 'hate' with another over the course of time.

I agree with Robey's conclusion on this, probably best to probe further with your CEO as to what exactly it is that they 'hate', it could be more to do with 'system/policy constraints' in practice rather than the underlying nature of the system itself.

Hi Danielle. We are a medium sized organisation and we don't have any kind of structure, certainly don't grade roles other than in one particular department, most roles we just try to remain as competitive as possible and we dislike bureaucracy here. You're always going to have that one person who breaks your mould and we like to be agile enough to keep those people. We try to benchmark roles where we need to by looking at the market, we also rise salaries in line with the cost of living or give a merit rise. It has never bitten us but I suppose that's a risk your CEO will have to consider the risks (equal pay etc.) as we also have very low grievance / disciplinary rates as well. Have you ever seen that Netflix slide deck about paying what people are worth? It is a bit American but its good for thought!

In reply to Laura Hood:

Just to say, Laura, that, based on past personal and detailed experience of intricate JE grading and salary structures and their converse, the observations in my previous post very much indeed apply

HI Dannielle,

I have encountered this issue before and I agree with everyone else’s comment.
You may also need to point out that by putting a strong emphasis on experience may potentially expose your organisation to claims of indirect discrimination, on the grounds of age and sex. The issue with age will be obvious, sex discrimination may arise as the scheme could discriminate against those who have taken maternity leave or career breaks to raise children.

Hi All
Thank you so much for all of your comments. I am going to propose we use just 4 bands. Junior, Experienced, Supervisor/Manager, and Senior Management.
The salary ranges will be quite broad within the bands and we will then use the appraisal system to move people up through the bands so the two systems work together. So basically someone with years of hands on experience will have the same opportunity to start at a pay level as someone with a relevant qualification for example.
What do you all think?

Hi Danielle
We are trying to move away from the grade culture of "Why is he a 5 when I'm only a 4?" etc and are using job banding/job 'families' . Within each family is a scale point e.g £25k-£28k and there are levels of responsibilities so it is clear to see where people fall and what family they belong to.
Good Luck!

In reply to Ashleigh:

Ashleigh, I'm going to be tackling such a project this year, would you mind sharing how you are going about it? It would be great to have another to bounce ideas with. Claire

You could always use families and competencies and align a salary band to the relevant family and level of competency. This way you still have an open and transparent way of aligning salaries.

In reply to Heather:

This is the way we are going to go I think. I have set up 4 "bands" which are basically unskilled, skilled, middle management, senior management. The job specs within these groups will depict the skill level required and there will be a salary range as well.

In reply to Ashleigh:

Hi Ashleigh,

How has your project of job evaluation, banding ad pay grading gone? I am embarking this journey in my new workplace and would perhaps some knowledge share from you on what went well, not so well, what would you do differently.