Bureaucratic time waster? Or invaluable tool?

I’m talking about salary structures. Those systems beloved of HR departments that are used to decide how to compensate employees. They usually take into account aspects such as employment length and comparative pay scales. 

Often, you’ll find grade-based structures with multiple levels and broad ranges for each level. You slot each position into a certain level based on the scope of the role, the authority, and the skills needed.

Most companies use salary structures to some degree. But do they really have any relevance in today’s modern and complex workplace?

What’s their purpose?

They’ve been around for years and were designed to provide a framework to manage base pay. For many, these structures form the basis of the financial agreement with an employee. They also provide a level of clarity around different salary levels.  

And to be honest, they can help a company meet the necessity of fair pay, whilst allowing bonuses and rewards to be layered on the top.

But there’s a problem

When you have to organise individuals into similar levels of responsibility and group together those with a similar impact on the organisation, it can get messy. It may have worked historically, but in the modern, fluid business world, responsibilities can change rapidly. Such traditional systems are rendered unfit for purpose.

Job evaluation has been the tool to organise people into similar job levels. But this is what causes problems with the deployment of salary structures in today’s fast-moving workplaces.

A better approach may be to implement job-based ranges, where people can advance as their responsibilities develop and change, even if their job title doesn’t.

Does one size fit all?

I’d say not. Don’t be too rigid, as it may not be effective to fit all employees into one framework. The diversity of the workforce means you may well have employees working on different types of contract. Different roles may be performed by different types of talent. You may need specific, unique skills that are learned on the job internally and cannot be bought from the external market. It’s unlikely that one system can satisfactorily handle every variation.

If you are looking to attract the best and most dynamic talent, you need to offer a package ahead of the market – and importantly, with the flexibility to go above that if justified. 

So, are salary structures needed at all?

In the fintech industry, there are a lot of start-ups, and for them, I think not. Compensation at a start-up company is usually made up of salary, benefits, and equity. 

The value of each is dependent on the stage of growth, the individual role, and someone’s previous experience. You probably have a small team to start with. The younger the company is, the lower the salary and benefits will be, but the higher the equity will be. 

As the company develops and grows, the scales start to tip in the other direction. The team gets bigger. At this point, I think some sort of salary framework is inevitable.

But too much procedure and structure can limit flexibility and decision making, just at the point where this is essential for growth. Don’t fall into the trap of tying yourself to a system that impacts negatively on your ability to attract top talent.

My advice would be to know what your salary structures should be – including package, bonus and equity – and make sure these are continually reviewed and adjusted to remain competitive. You need to keep on top of this – fintech salaries have risen by 25% in the last year, for example. 

Does your organisation use a salary structure – and if so, do you feel it helps or hinders your recruitment process? Join the discussion by commenting below. 

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