Pay Bands

A pay band is sometimes used to define the range (band) of compensation given for certain roles. The range is based on factors like location (high vs low cost of living locations), experience, or seniority.

Pay bands (sometimes also used as a broader term that encompasses several pay levels, ranges or grades) is a part of an organized salary compensation plan, program or system. In an organization that has defined jobs, pay bands are used to distinguish the level of compensation given to certain ranges of jobs to have fewer levels of pay, alternative career tracks other than management, and barriers to hierarchy to motivate unconventional career moves. For example, entry level positions at a landscaping company might include truck drivers and laborers. Those jobs and those of similar levels of responsibility might all be included in a named or numbered pay band that prescribed a range of pay, (e.g. Band 1 = $10 - $17 per hour). The next level/classification of a group of similar jobs would include increased responsibility, and thus a higher pay band (e.g. Band 2 = $13 - $21 per hour).

Organizing pay structures in a pay band manner allows for overall control at the management level of an organization, while still giving some discretion for supervisors to reward good performance, and keeping within a reasonable compensation budget structure.

The history of Pay Bands dates back to the beginning of employment and compensation. The amount of compensation for one's work is a question that many have tried to answer but have come short. The Classification Act of 1923 mandated that pay was based on performance not qualifications, a practice that made sense when the workforce was largely clerical. However, by the 1950s managers were complaining that the system was problematic for reasons of no competition, frustration and non responsive. In April 2000, the United States General Accounting Office authorized Section 9509 which authorized the general workforce classification and pay. In detail, the term "broad-banded pay system" was clearly defined as any system for grouping positions for pay, job evaluation, and other purposes that is different from the system established under chapters 51 and 53 of title 5 as a result of combining grades and related ranges of pay into one or more occupational series.

Organizations are looking for a pay system for rewarding with compensation and also working well within that organization. In the traditional structure there is a difference between employee and manager with an example of pay according to their position. To get a high pay, there needs to be movement up the hierarchical ladder. Moving up the ladder to a manager position will change the pay range is a traditional pay structure but, "this system fosters competition rather than collaboration."

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