Pay Grades

A pay grade is a step within a compensation system that defines the

amount of pay an employee will receive. The pay grade is generally
defined by the level of the responsibilities performed within the job
description of the position and the length of time the employee has
performed the job.
Pay grades provide a framework for compensation by defining the
amount of pay available at each step in the employment process.
An employee who is new to a job in a particular pay grade range
starts at pay step one of the pay grade. If he or she continues to work
in the same role, the pay grade allows upward movement in salary,
usually one pay step per year of service within the pay grade
assigned to that job

Compensation systems involving pay grades are often used within

public sector employment such as the Federal government, the
military, and universities.
Pay steps within each pay grade differ between organizations and
may involve as many as 10-15 or more pay steps before an
employee reaches the top rate of pay for their pay grade.
An employee may also obtain a promotion or move to a different
job with more responsibilities to start moving up the pay steps of
the next pay grade level

ESTABLISHING PAY GRADES

In the process of establishing a pay structure, organizations use pay
grades to group individual jobs having approximately the same job
worth. While there are no set rules to be used in establishing pay
grades, some overall suggestions have been made. Generally, from
11 to 17 grades are used in small companies. However, as discussed
earlier, a growing number of employers are reducing the number of
grades by broad banding. By using pay grades, management can
develop a coordinated pay system without having to determine a
separate pay rate for each job in the organization. All the jobs within
a grade have the same range of pay regardless of points. As
discussed previously, the factor-comparison method of job evaluation
uses monetary values, so an employer using that method can easily
establish and price pay grades. A vital part of the classification
method is developing grades. Organizations that use the ranking
method can group several ranks to create pay grades.

Grade

Point
range

Minimum
Pay

Midpoint
Pay

Maximum
Pay

Below 300

6.94

8.50

10.06

300-329

7.96

9.75

11.54

330-359

8.98

11.00

13.02

360-389

10.00

12.25

14.50

390-419

11.01

13.49

15.97

420-449

11.79

14.74

17.69

Over 450

12.79

15.99

19.18

Salary range is the range of pay that has been established to be paid
to employees performing a particular job or function. Salary range
generally has a minimum pay rate, a maximum pay rate, and a
series of mid-range opportunities for pay increases. The salary range
is determined by market pay rates, established through market pay
studies, for people doing similar work in similar industries in the
same region of the country.
Pay rates and salary ranges are also set up by individual employers
and recognize the level of education, knowledge, skill, and
experience needed to perform each job. The salary range
demonstrates the interrelationships of the jobs utilized by an
employer. The salary range should reflect employer needs such as
the overlap in salary ranges that will allow career development and
pay increases without promotion at each level and the percentage of
increase the organization will offer an employee for a promotion.
The salary range for executive-level positions is normally the largest;
the salary range for lower-level positions is normally the narrowest.
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PAY RANGES
The pay range for each pay grade also must be established. Using
the market line as a starting point, the employer can determine
maximum and minimum pay levels for each pay grade by making
the market line the midpoint line of the new pay structure. (See
Figure 1314.) For example, in a particular pay grade, the maximum
value may be 20% above the midpoint and the minimum value 20%
below it.

A smaller minimum-to-maximum range should be used for lower-level

jobs than for higher-level jobs, primarily because employees in lowerlevel jobs tend to stay in them for shorter periods of time and have
greater promotion possibilities. For example, a clerk-typist might
advance to the position of secretary or word processing operator. In
contrast, a design engineer likely would have fewer possibilities for
upward movement in an organization. This expanding approach also
recognizes that individual performance can vary more greatly among
people in upper-level jobs than in lower-level jobs.
Experts recommend having overlap between grades. This structure
means that an experienced employee in a lower grade can be paid more
than a less-experienced employee in a job in the next pay grade. Once
pay grades and ranges have been computed, then the current pay of
employees must be compared to the draft ranges. If a significant number
of employees are out of range, then a revision of the pay grades and
ranges may need to be computed. Also, once costing and budgeting
scenarios are run in order to see the financial input of the new pay
structures, then pay policy decisions about market positioning may have
to be revised. As a result, changes to the pay ranges may lead to
lowering or raising the ranges
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Meaning of pay scale 10000-470/6-12820-500/3-14320560/7-18240?

this is the basic pay structure gen followed in Public Sector.. here
is what it meansinitial basic of Rs 10,000..
6 increments of Rs 470 each..
thereafter a basic of 12820..
3 increments of 500 each..
and so on..
the maximum in this cadre is going upto Rs. 18240..

Pay Matrix or Salary Matrix

A list that shows the levels of pay in a company in relation to
different jobs, that is used to help decide pay increases.
A salary increase matrix is a two dimensional matrix comprised of
performance levels (e.g., meets expectations, exceeds expectations,
etc.) on one axis and position in salary range (e.g., lower third,
middle third, upper third) on the second axis, with targeted salary
increases in the grid. High performers paid low in range should
receive the largest salary increases, while lower level performers
already paid at or above midpoint should receive smaller or no
increases.
SALARY INCREASE PLANNING MATRIX
Salary increases should be guided by position in range of the
current salary (adjusted for number of hours actually worked) and
performance. Use the following matrix to guide you as you consider
pay increases for your employees. To begin, write the names of your
employees into the areas on the matrix indicated by the position of
their current salary in the range and by their performance.

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