At its most basic, a salary structure is the manner in which an organization carries out its pay philosophy. They help to eliminate discretionary increases that are far higher than necessary. Within a tightly packed job grade, there is not a whole lot of room for favoritism or other unfair pay treatment. Hourly vs. Salary Pay . As companies increase in size they are more likely to have salary range structures. OK. OK. OK. Gross Salary = Basic Salary + HRA + Other Allowances. While a typical salary band has a 40% difference in pay between its minimum and maximum points, a broadbanding structure can cover more than double that between its low-end and high-end. A CEO would find it outrageous to have an inventory of products to sell with no set range of prices for those products. Internal job titles and job descriptions may not always be aligned with the market (e.g. There is a strong correlation between job level and number of salary structures. salary structure) is a hierarchal group of jobs and salary ranges within an organization. What you and your organization can do is to have a salary structure. Salary range spreads and midpoint-to-midpoint differentials vary significantly by job level. Allowances and Benefits of an IAS Officer In addition to the salary structure given above, there are allowances like House Rent Allowance (HRA), Dearness Allowance (DA), and Travel Allowance (TA), which will be extra. Other benefits can vary between industries and businesses and are sometimes referred to as "fringe" benefits. After all, if you underpay a position, an employee will likely start looking elsewhere. Traditional vs. Broadband Salary Structures. Eight ways to structure your salary and get tax advantages. Effective salary structures are equitable, competitive, and supportive of organizational objectives. 2010-2011 Culpepper Salary Budget & Planning Survey. Nineteen percent of participants with formal salary range structures reported that they do not use formal salary structures with executives. On average, 82 percent of surveyed companies use traditional salary structures, while only 7 percent use broadband structures (Figure 2). Need help with a specific HR issue like coronavirus or FLSA? Salary Structure Benefits. Imagine you're the HR director of a small chain of retail stores and you've been tasked with hiring for a new position that you've neither had before, nor have any familiarity with. Employers Trim Projected Pay Raises for 2021, Salary Increase Budgets Decline for First Time in 12 Years, Employers Embrace 'Resilience Through Rewards' Strategies. Why would that same CEO not have the same expectation for employee pay? Nine percent use a hybrid or mix of traditional and broadband structures. $(document).ready(function () { } The days of gaining significant tax advantages from salary structuring with subsistence allowances,and the like, are gone—and only certain items can be legally taken as components of a total salary package. And not just any salary structure, but an efficient one. RETIREMENT BENEFITS/CONTRIBUTIONS The fourth and the most important component of any salary structure is the retirement benefit contribution which is not payable to the employee immediately and is in the nature of long-term savings for them. They help make sure that the pay levels are externally competitive and internally fair. Having a structure also helps to eliminate awkwardness in pay conversations between managers and employees. Please enable scripts and reload this page. Let SHRM Education guide your way. It helps organizations retain their current employees. Some companies with union employees review salary structures based on the length of multiyear labor contracts and review other nonunion jobs annually. Single salary structures are more common for executives and multiple salary structures are more common for nonexecutive positions (Table 3). if(currentUrl.indexOf("/about-shrm/pages/shrm-china.aspx") > -1) { If you are from organizations that have tried either structured or unstructured pay, are you in favor of salary structures, or do you think they are too restrictive to be valuable – let us know! Frequency Salary Range Structures Are Reviewed. Source: Companies with Salary Range Structures. Salary Structures. Salary is such a small word whereas if we zoom in into this it consists of many parts like Basic Pay, Allowances, Perquisites, etc. This will include components such as PF contribution from the employer, gratuity provision, any insurance that is being provided or any other benefits. 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