Setting up a pay structure can make it easier to manage your payroll expenditure. A pay structure helps you to evaluate jobs and establish compensation for different jobs and groups. It can help to make your hiring process easier to execute. Here are some steps to consider when creating a salary structure.

Develop your job analysis

A job profile structure is a list of all the available and future positions in your company. Outline your job duties, qualifications, and descriptions. Make a list of these roles, highlighting their primary and secondary roles. Identify the essential tasks of each job and develop descriptions that match each job role.

Benchmark

Benchmarking means to create a salary range based on identifiable market data. Benchmark jobs can be found by checking similar roles in competitor businesses and identifying how much those jobs are paid. For example, comparing the salary of a Manager of Bank A with Bank B. You can leverage already conducted surveys done with your desired competitors. There are also public data such as Glassdoor, Indeed, and local platforms like My Salary Scale.

Budget

Develop a budget for your payroll costs. Calculate what your expected profits would be and your estimated staff costs. Staff costs should be calculated based on the net cost of labour, by adding all additional benefits a staff would enjoy such as club memberships, HMOs, etc. You can then use your internal budget to check how much you can afford to pay your staff based on the benchmarked rates.

Develop a Pay Grade

Salary structuring becomes easier when you standardize salary scales into grades. A grade could be defined as job levels within your organisation. This can be determined by grouping people with similar years of experience, job skills, education levels, job roles and responsibilities. For example:

On the Finance Assistant level, multiple employees who are on this grade can earn the same or similar similar salary amounts.

Job Evaluation

This is when you determine the relative value and relevance of each job positions within your company. This means that jobs are compared with each other based on defined criteria such as education, experience, level of responsibility and revenue impact of a respective role. Job positions can be on the same grade, but salary structures can be different depending on the role that a staff is engaged in. An example is a business development manager and a customer service manager. Depending on the business, both roles can be on the same level, but can have different salary structures depending on the level of relevance and effort each role brings to the business. Job evaluation should be carried out in an unbiased manner, by considering the role rather than a staff engaged in a role.