What are the advantages and disadvantages of using salary bands

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It’s time to get serious about salaries. With the EU Pay Transparency Directive coming into force soon, HR leaders are preparing for the transition toward meeting these new regulations. But where do you start? 

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Salary bands — a.k.a salary ranges, salary bands, pay bands, or pay ranges — are one of the most effective ways to ensure your company’s HR department is ready.

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 But before you dive headfirst into creating a new pay strategy, it’s important to consider the pros and cons of a salary structure — and how Figures can help you move towards a more transparent and equitable compensation strategy. 

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The advantages of a salary range 

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The flexible framework offered by salary bands brings plenty of advantages for HR leaders and companies. From pay equity to attracting top talent and creating a culture of openness and trust, there’s a lot to like… 

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1. Pay equity

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The pressure is on for companies to deliver equitable pay. Without clearly defined salary bands, it’s far more challenging to justify salary decisions made by individual leaders. These kinds of ad-hoc decisions only serve to maintain the gender pay gap. 

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We’ve already found that forward-thinking companies using salary bands find it easier to make equal pay a reality.   

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2. Attracting, retaining, and engaging the top talent 

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Top talent doesn't want a “competitive salary” — after all, what does that even mean? 

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Instead, by posting a realistic salary band with each job description, potential new hires can clearly see what compensation they’ll be offered in return for their time and skills. Salary bands also make it much easier to retain and engage your existing employees. 

That’s because it’s easier for them to visualise their progression at the company as they develop, rather than moving on to another role elsewhere as their skills evolve.

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3. Promoting transparency & fairness 

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Transparency might be the HR word of the moment — but what is pay transparency worth if your company doesn’t have a strong compensation strategy that genuinely promotes transparency from the top down? 

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Using salary bands to create a transparent and fair framework around pay is a great way to show employees that they’re being paid fairly, while also meeting the EU Pay Transparency Directive. 

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4. Reducing unconscious bias 

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Without structured salary bands, one manager's approach to setting salaries for their team might look very different from another. 

Without a framework that’s built around clear salary bands, unconscious bias can affect this process. Compensation decisions are far more equitable — and easier to achieve — when everyone can follow a clear framework. 

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5. Make pay management more effective

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Many companies are under pressure to do more with less. 

But using salary bands can make budget planning more straightforward and reliable because it’s easy to see how hiring decisions will impact your overall spending. Salary bands also help make compensation reviews far more straightforward, because there’s a clear framework that underpins every discussion. 

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Challenges of using salary bands 

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Maybe it sounds like salary bands are the perfect solution — but there are always two sides to every story. 

Making an informed decision about whether or not to implement salary bands at your company means knowing what the downsides are (and how to overcome them). 

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Here’s what you need to know…

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Administrative burden 

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Launching salary bands does take time. 

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Your HR team not only needs to decide which bands to create and in what detail, but they’ll also need to create a leveling framework that helps structure each salary band. Then you’ll need market data to complete your salary grid! Once that’s done, you’ll need to evaluate your bands. This should be done annually at the minimum, but preferably twice a year. 

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(Top tip: Figures has leveling frameworks and market data to help you save time and kickstart this process.)  

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You may need to complete pay reviews 

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In addition to setting salary bands for new hires, it’s important to evaluate whether the salaries of your existing employees align with these.

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You may spot gaps or need to make compensation adjustments.

A good rule of thumb is that employees fulfilling your expectations should be positioned at least within the middle of their band, never any lower. These adjustments may impact your budget — but are a necessary part of a fair process.   

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Why create salary bands? 

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TLDR: Attract and retain talent through the most efficient and compliant way.

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Salary bands help promote pay equity, drive transparency, and attract top talent — so what’s not to like? Unfortunately, the time it takes to transition to this new system is what puts a lot of HR leaders off from taking the plunge.  

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But—choose the right tools to help automate this process, and your team can save time. That’s why we’re launching Figures Salary Bands. 

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Next up in our series of blogs designed to help you discover all you need to know about how salary bands work:

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• Best practice for your company’s salary band strategy
• How to create your first set of salary bands 
• How to maintain salary bands 
• Should you share salary band information with your employees? 

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Contact in touch with our team to get first access to Figures Salary Bands!