How to design grades and bands

Group roles by size, not by title

Titles vary across departments, so judge roles by what they demand. Score each role on four or five factors: knowledge and qualification needed, complexity of decisions, scope of people or budget managed, and the impact of mistakes. A simple 1 to 5 score per factor is enough. Roles with similar totals go into the same grade, even if one is called Executive in sales and Officer in finance. This is what makes pay comparable across the company.

How many grades

Too many grades make every small increase feel like a promotion; too few leave no room to grow. A 150-person company might work well with six to eight grades, while a group of several thousand usually needs more. Name them simply, such as W1 to W3 for workers, E1 to E3 for executives, M1 to M3 for managers and L1 to L2 for leadership. The names should show order at a glance.

Build the salary bands: a worked example

Take grade E2. Internal pay data and market information suggest a midpoint of ₹5,40,000 a year in CTC. With a band spread of 40 percent, the minimum is the midpoint divided by 1.2, which is ₹4,50,000, and the maximum is the minimum times 1.4, which is ₹6,30,000. The midpoint of ₹4,50,000 and ₹6,30,000 is ₹5,40,000, as intended. If E3's midpoint is set 20 percent higher, at ₹6,48,000, its range runs from ₹5,40,000 to ₹7,56,000. The two bands overlap, which lets a strong E2 earn more than a new E3 without breaking the structure.

Placing people in the new bands

Map every employee to a grade, then compare their pay with the band. People inside the band need no change. People below the minimum should be brought up over one or two increment cycles, with a budget set aside. People above the maximum are usually held: no increase to base pay until the band moves past them, with any reward paid as a one-time amount. Explain the grade and band to each employee privately.

• Grading people instead of roles
• A grade for every title, so bands mean nothing
• Bands with no overlap, which forces promotions for every raise
• Cutting pay of people above the band maximum
• Keeping the structure secret from managers who make pay decisions

Step by step

1. List every role. Write a short description of each distinct role: purpose, main duties, people managed and budget handled.
2. Evaluate roles on a few factors. Score each role on knowledge, decision complexity, scope and impact of errors, using the same scale and panel for every role.
3. Group roles into grades. Place roles with similar scores in the same grade, and check the result with department heads for anything that looks wrong.
4. Name the grades. Use short codes that show order, such as E1 to E3 and M1 to M3, and publish which roles sit in each.
5. Set a midpoint for each grade. Use your internal pay data and market information to set the midpoint, usually 15 to 20 percent above the grade below.
6. Set the minimum and maximum. Choose a spread, such as 40 percent, calculate the minimum and maximum around the midpoint, and check the overlap with neighbouring grades.
7. Place employees and plan corrections. Compare each person's pay with their band, plan increases for people below the minimum, and decide how to treat those above the maximum.
8. Record grades in your HRMS. In ZeniaHR, add grades as a master and set each employee's grade on their record. Salary structures are built from the monthly gross, split into Basic, DA, HRA and Special.

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