How to Establish Salary Ranges

Every organization requires a salary range for each position. The salary range defines the minimum and maximum pay rate that employees can earn for a given position or function. Employers set the range based on several factors, including the organization’s needs and industry trends. The ideal salary range must give the employees opportunities and motivation for career development. For instance, attaining higher education, experience, or additional skills should lead to a higher salary. Here are additional tips that will help an organization set the right salary ranges.

1. Set a Salary Policy

You have two major alternatives when setting the salary range in your organization. You can have a fixed base salary or a variable pay. The variable pay can be based on an employee’s working hours or performance. Alternatively, you can set a base salary for each position based on the current performance of the organization. Employees can earn bonuses when the revenues are high but during the low seasons, they will earn the base salary only. You can increase the base salary as the organization grows.

2. Consider the Organization’s Goals

Do you have clear short-term and long-term goals for your business? If yes, you need all your employees working towards achieving those goals. The salary range should help the organization achieve those goals. You need a fair salary scale that will keep your employees motivated while checking the salary budget. Consider your human resource goals as well. Your employees will always discuss their salary and ask for more. Fairness and equality are important when setting salaries that will enhance employee satisfaction and motivation.

3. Check your Competitor’s Range and Industry Trend

One of the reasons why you need to keep your employees motivated is that you may lose them to your competitors. If your competitors offer better salaries to your best employees, they will resign and join your competitors. Hence, while considering the internal situation in your organization, check the average salaries in your industry. Websites like Salary Site compile salaries for different professions. If you are unsure about your competitors’ range, such websites will give you the average salaries in the industry.

4. Develop a Benefits and Bonus Policy

Keeping up with industry trends is sometimes difficult, especially for small businesses. Remember that your main goal is to offer fair salaries that will help you attract and retain the best talent. Bonuses and a benefits package will help you achieve this goal, even when your organization cannot afford high salaries. Most businesses do not have a clear philosophy on bonuses and benefits. Your employees need clarity on how they can qualify for bonuses and the benefit packages available for different positions. Be clear about the value of the benefits and bonuses.


The salary philosophy in your organization should not be a secret or mystery. Communicate the philosophy to all employees and explain the organizational goals they should help you achieve. Create a clear path on how to earn higher salaries or qualify for a promotion. Your best talents are likely to stay with you if they see clear opportunities for career development, even when the initial salary is low.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *