What is a Salary Band? Meaning, Range and Example

How salary bands are structured

Each band has a minimum, a midpoint and a maximum. The midpoint is usually set near the market rate for a fully competent person in that grade. The spread from minimum to maximum is often narrower at junior grades and wider at senior grades, where experience varies more. Adjacent bands usually overlap, so a very experienced person in one grade may earn more than a new person in the next grade. Review the bands every year against market data and inflation.

• Minimum: entry pay for someone who just meets the grade's requirements
• Midpoint: target pay for a fully competent employee
• Maximum: the ceiling for the grade, beyond which a promotion is needed

Salary band vs grade vs designation

Put simply, the designation names the job, the grade places it on the ladder, and the salary band prices that rung. Some companies also use 'band' for a broad level that combines several grades, such as Band C covering M1 and M2. This practice, called broadbanding, gives managers more room to pay for skills without a promotion. Whichever usage you follow, state it in the compensation policy, so offer letters and increment letters are read the same way by everyone.

Using bands in offers and increments

When hiring, place the candidate in the band by experience and skills, not only by their current salary. When deciding increments, give larger raises to strong performers low in the band and smaller ones to those near the maximum. Check each band's pay structure against the wage rules too: under the Code on Wages, basic pay plus dearness allowance must be at least half of total remuneration, so a band quoted as CTC must still leave room for a compliant basic. See the wage definition. Bands live in your compensation policy, while ZeniaHR stores each employee's grade and salary structure.

Frequently asked questions