Salary structure is always going to be a complicated part of setting up your business and the hierarchy of the employee chain. While it’s a process that can be frustrating if you’re into the idea of fairness, you can still be fair while creating considerable salary leaps in various departments. However, even if you go by market conditions when determining salary structure, you may want to consider using more psychology to get the best out of your employees. Much of that starts in the slightly upper end scale where an employee might expect to see a significant salary increase.
This method of salary structure may be the most fair based on what other companies in your region are paying their employees. Your only problem is agreeing on setting your rates using the same analysis they use. Competitors may be setting their salaries based on a basic job title, the difficulty of the job, or how it affects profits.
You may not want to go by that entirely. Eventually, you may find out your salary rates will go higher or lower based on more personal factors you set.
Basing Salary on Competency and Skill
Rather than think entirely about your bottom line, you may want a fairer system of setting a salary based on the skill level of a hired employee. While that employee will have to prove to you they have particular competency and skill to excel at their job, you can adjust their salary later based on job performance.
Basing salary on skill makes an attempt to remove the hierarchical structure of pay based merely on job title.
Consolidating Job Titles
For those who want to continue to remove the lines of hierarchies in the business world, reducing job titles to grouped categories can help give a leaner salary structure. Sometimes it’s possible to whittle your business down to just a few categories to give the appearance there’s a shorter ladder to the top. This is sometimes known as broadbanding. But some businesses have eliminated this structure to reflect more reality in salary market conditions.
Moderating Salaries at Middle and Higher Levels for Motivation
No matter what choice you make in choosing salary ranges, the variables will still matter in how it affects the morale of your employees. Creating a decent working wage for those starting at the bottom will be essential. However, what about the higher levels? Does spoiling your employees with higher wages give them a lack of motivation to keep doing well?
There seems to be a deep psychological connection between motivation and knowing you’ll be compensated for that hard work later. Setting a salary range that’s more moderated at higher levels will keep those employees as motivated as those at the bottom. Pay increases can then happen in increments once mid to upper level employees succeed at bringing their best to a business objective.
Going this way, you’ve created a salary system that isn’t based on a corporate structure. It’s a dangerous system of giving financial rewards much too early and tempting work quality diminishing in the future.