49. GRADE GRA DE AND PAY PAY STRUCTURES Key learning points Guiding priniples !or grade and pay strutures Grade and pay structures should: ● Be appropriate appropriate to the culture, culture, characteristics characteristics and and needs needs of the organizati organization on and its employees. ● Facilita Facilitate te the manageme management nt of relativit relativities ies and the achievement achievement of equity, equity, fairness, fairness, consistency and transparency in managing gradings and pay. ● Be capable capable of adapting adapting to pressure pressures s arising from from market rate change changes s and skill shortages. ● Facilitate operational operational fleibility fleibility and continuous continuous developme development. nt. ● !rovide !rovide scope as required required for re"ardi re"arding ng performanc performance, e, contributio contribution n and increase increases s in skill and competence. ● #larify re"ard, lateral development development and and career opportunities. opportunities. ● Be constructed constructed logically logically and clearly clearly so that the the basis upon upon "hich they they operate can readily be communicated to employees. ● $nable the the organization organization to eercise eercise control control over the implementa implementation tion of pay policies policies and budgets. Types o! grade and pay strutures %ummarized in table at the end of these points. Designing grade and pay strutures ● &here &here is a choice choice of structure structure,, and "hicheve "hicheverr structure structure is selected, selected, there there "ill be a number of design options. ● &he first first decision decision to make is "here to place place grade bound boundarie aries, s, "hich is usually usually informed by a 'ob evaluation eercise. ● (ecision (ecisions s on grade bounda boundaries ries "ill be influenced influenced by considerati considerations ons affectin affecting g the number and "idth of grades. ● Further Further options options eist on the pay structure structure concerni concerning ng the different differentials ials bet"een bet"een grades, the degree to "hich there should be overlap bet"een grades, if any, and the method of pay progression "ithin grades.
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● -n broadbanded structures there is also choice on the infrastructure /the use of reference points or zones0. ● -n career or 'ob family structures there are options concerning the number of families.
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Su""ary analysis o! di!!erent grade and pay strutures
Type 2ulti graded
#eatures •
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Broad graded
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Broad banded
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?ob family
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!ay spine
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sequence of 'ob grades 3 *4 or more 5arro" pay ranges, eg 1463746 !rogression usually linked to performance
sequence of bet"een 9 and grades Fairly broad pay ranges, eg 7463;46 !rogression linked to contribution and may be controlled by thresholds or zones series of, often, ; or 9
46 !rogression linked to contribution and competence %eparate grade and pay structures for 'ob families containing similar 'obs !rogression linked to competence and)or contribution series of incremental pay points covering all 'obs Grades may be superimposed !rogression linked to service
Ad$antages •
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#learly indicate pay relativities Facilitate control $asy to understand
Disad$antages •
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s for narro" graded structures but in addition: the broader grades can be defined more clearly better control can be eercised over grade drift
2ore fleible +e"ard lateral development and gro"th in competence Fit ne"style organizations
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#an appear to be divisive 2ay inhibit lateral career development 2ay be difficult to maintain internal equity bet"een 'ob families
$asy to manage !ay progression not based on managerial 'udgement
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#reate hierarchical rigidity !rone to grade drift -nappropriate in a delayered organization
&oo much scope for pay progression #ontrol mechanisms can be provided but they can be difficult to manage 2ay be costly
#reate unrealistic epectations of scope for pay rises %eem to restrict scope for promotion (ifficult to understand $qual pay problems Facilitate pay differentiation bet"een market groups. (efine career paths against clear criteria
5o scope for differentiating re"ards according to performance 2ay be costly as staff drift up the spine
%&en appropriate •
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-n a large bureaucratic organization "ith "ell defined hierarchies 8hen close and rigid control is required 8hen some but not too much scope for pay progression related to performance or contribution is "anted (esirable to define and differentiate grades more accurately as an aid to better precision "hen grading 'obs Grade drift problems eist 2ore scope "anted to re"ard contribution
-n delayered, processbased, fleible organizations 8here more fleibility in pay determination is "anted 8here the focus is on continuous improvement and lateral development 8hen there are distinct market groups "hich need to be re"arded differentially 8here there are distinct groups of 'obs in families
-n a public sector or voluntary organization "here this is the traditional approach and it therefore fits the culture 8here it is believed to be impossible to measure differential levels of performance fairly and consistently
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'uestions *. 8hat is a multigrade structureA 1. 8hat is a broadbanded structureA @. 8hat is a 'ob family structureA 7. 8hat is a pay spineA ;. 8hat are the guidelines for deciding on grade boundaries "hen designing a structureA
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Ans(ers *. 8hat is a multigrade structureA ● multigrade structure /sometimes called a narro"grade structure0 consists of a sequence of 'ob grades into "hich 'obs of broadly equivalent value are placed. ● &here may be *4 or more grades and longestablished structures, especially in the public sector, may have as many as *> or even more. ● Grades may be defined by a bracket of 'ob evaluation points so that any 'ob for "hich the 'ob evaluation score falls "ithin the points bracket for a grade "ould be allocated to that grade. ● lternatively, grades may be defined by grade definitions or profiles that provide the information required to match 'obs set out under 'ob demand factor headings /analytical matching0. ● &his information can be supplemented by reference to benchmark 'obs. 1. 8hat is a broadbanded structureA ● Broadbanded structures compress multigraded structures into four or five
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through the activities carried out and the basic kno"ledge and skills required, but in "hich the levels of responsibility, kno"ledge, skill or competence required differ. ● -n a 'ob family structure, different 'ob families are identified and the successive levels in each family are defined by reference to the key activities carried out and the kno"ledge and skills or competences required to perform them effectively. ● ?ob families define career paths 3 "hat people have to kno" and be able to do to advance their career "ithin a family and to develop career opportunities in other families. ● &ypically, 'ob families have bet"een si and eight levels, as in broadgraded structures. %ome families may have more levels than others. 7. 8hat is a pay spineA ● !ay spines are found in the public sector or in agencies and charities that have adopted a public sector approach to re"ard management. ● &hey consist of a series of incremental
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lo"er grade, although this principle should not be follo"ed slavishly "hen an organization is overhierarchical "ith, perhaps, a series of oneoverone reporting relationships. ● &he boundaries should not be placed bet"een 'obs mainly carried out by men and 'obs mainly carried out by "omen. ● &he boundaries should ideally not be placed immediately above 'obs in "hich large numbers of people are employed. ● &he grade "idth in terms of 'ob evaluation points should represent a significant step in demand as indicated by the 'ob evaluation scheme.
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