Salary range: All you need to know

Continued from last week

Salary range midpoint

e salary range midpoint represents the most competitive pay for a grade. is is only valid if the pay structure was designed using market salary information comparisons. In such a case, an organisation can decide to make the median of the market or the 75th percentile of the market's reference point.

e salary range midpoint, the progression of grade midpoint salaries from one adjacent grade to the other, can range between 5% to as high as 40%.

A high salary range midpoint is found in very competitive roles or grades. Lowerlevel grades tend to have lower progression. e formula for calculating the midpoint of a salary range is as follows:

Before calculating the salary range for your pay structure, you need to decide what range spread you will use in your pay structure. For example, if you choose the range to be 60%, you need the formula to convert this into grade salary ranges. e formula should help you calculate the salary range minimum and salary range maximum. e formula for calculating range spread is Maximum minus minimum expressed as a percentage.

($2 292 - $1 432)/2 292 *100 = 60%

Salary Range Calculator

Salary Range Minimum = grade salary range midpoint/1+ half of the range(30%).

Using the midpoint for grade 5 Salary Range Minimum= $ 1 862/1,30

$1 432

Salary Range Maximum = minimum* 1+ range (60%)

Using the midpoint for grade 5 in Table 1 Salary Range Maximum = $1 862*1,60

$2 292

Salary Range penetration

A salary range penetration looks at how far an individual salary has penetrated the salary range. Unlike compa-ratio, where the reference point is the midpoint of the salary range, salary range penetration looks at the progress towards reaching the salary range maximum in a particular grade.

Range penetration = (individual salary – grade minimum salary)/grade maximum salary – grade minimum salary) * 100.

e range penetration ranges from 1% to 100%.

e higher the range penetration, the higher the individual's salary in relation to the grade. If we take the grade salary range below for an employee in grade 5 earning $1 658, the range penetration is calculated as follows:

Range penetration = ($1 658- $1 235)/ ($2 123- $1 235) * 100 = 48%. is range penetration is low as the individual has not even reached the salary range.

Grade Min Mid Max Range 5 $1 235 $1 862 $2 123 72%

Outside the salary range pay

For various reasons, you may find some of your employees being paid outside the salary range for the grade. is happens when a new job evaluation system is introduced in an organisation. Make every effort to move all the employees paid below the minimum of the grade salary range to the minimum of the grade.

You can do very little for employees already paid above the maximum of the salary range as you cannot reduce their salaries.

e best way to control their salary movement is not to give them anything when making salary adjustments for other employees until they fall within the grade salary range over time.

With more frequent adjustments impacting the salary structure, they will be within the salary range.

When HR professionals understand how useful salary ranges are to remuneration management, they can add value. erefore, organisations should use the various salary range options outlined in this article to manage remuneration.

Nguwi is an occupational psychologist, data scientist, speaker and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and HR consulting firm. — ipcconsultants.com