PAY STRUCTURES
New IPD research on broadbanding and job families
When it comes to introducing broadbanding, it is vital to recognise that one of the most important issues in the process is consistent communication and involvement of employees at all levels, says a new report by the UK's Institute of Personnel and Development.
The 193-company survey, underpinned by an extensive case-study research programme, finds that there has been a considerable increase in the number of organisations with broadbanding in recent years. Driven by the twin pressures of the need to replace complex pay structures and changes in organisational arrangements (table 1), broadbanding has become the leading approach to managing base pay.
And this is no passing fad, says the IPD: Broadbanding is here to stay . Long gone are the days of the hierarchical and narrow graded structure.
Getting it right
Introducing broadbanding is certainly not an easy option. What matters most it turns out is effective communication and involvement as a means of giving understanding, ownership and acceptance of the new arrangements .
One of the secrets to success, the IPD adds, is the need to get line managers and staff representatives involved at the outset.
Says the IPD: Ineffective project teams need to be replaced by workshops and focus groups to involve line managers and staff to consider the design, development and smooth implementation of new arrangements.
Contingency approach required
According to the authors of the report, one of the most obvious conclusions to emerge from the research is that approaches to broadbanded structures are characterised by great diversity and variety.
Though certain basic principles can be identified — take, for example, flexibility and the integration of pay systems with competence, skill and career development processes — each organisation applies these principles in the context of its own culture.
The report concludes with a powerful message: This research has quashed once and for all any idea that there is such a thing as 'best practice' when applied to pay systems. It is best fit that matters and a contingency approach is the one usually adopted.
Key survey findings
Extent: broadbanded pay structures — five or less bands — are most common for senior executives (83% of survey respondents), followed by managerial/professional (74%), with staff in their wake (49%).
The hierarchical and narrow graded pay structures typical of the 1970s and 1980s are now being replaced by broadbanded pay schemes. — IPD.
Width of grades/bands: nearly half of survey participants have structures with bands of 50% or more.
Job evaluation: although 24% of all respondents use grade/band or generic role definitions to define grades, 42% rely on analytical job evaluation. More than a third of organisations (34%) assign jobs to broad bands using analytical job evaluation.
The research confirms yet again that the death of job evaluation has been greatly exaggerated. Job sizing is still regarded as a necessary basis for supporting the design of the structure and, importantly, ensuring that a reasonable degree of internal equity is maintained, subject always to market rate considerations. However, once the structure has been established, job evaluation is being relegated to a support and validation role. — IPD.
Progression within bands: what emerges very clearly from the IPD research is that there is a tendency to structure bands more — 43% of respondents have incorporated zones within bands that indicate the normal range of pay for someone in a particular generic role.
The majority of respondents to the survey (78%) have decide that some control in the form of a bar to pay progression is necessary. — IPD.
Table 1: Why do organisations introduce broadbanding?
| Objectives | Per cent of respondents |
| Provide more flexibility in rewarding people | 29% |
| Reflect changes in organisation structure | 18% |
| Provide better base for rewarding growth in competence | 14% |
| Replace over-complex pay structure | 12% |
| Devolve more responsibility for pay decisions to managers | 11% |
| Provide a better basis for rewarding career progression | 11% |
| Reduce need for job evaluation | 8% |
| Simplify pay administration | 7% |
| Eliminate the need for job evaluation | 2% |
Source: Institute of Personnel and Development.
One in five plan to introduce job families
Although job families are still very much a minority practice (used by just 16% of respondents), take-up looks set to grow — one in five survey respondents planned to introduce such a structure within the next two years.
Organisations which introduced broad bands to replace hierarchical structures that over emphasised promotion are now contemplating the introduction of job families as alternative means of demonstrating career and pay progression opportunities to their staff. — IPD.
Why do organisations introduce job families?
| Objectives | Per cent of respondents |
| Map out career paths | 28% |
| Achieve more flexibility | 24% |
| Identify market groups | 22% |
| Provide for rewards to be based on personal contribution and progress | 21% |
Source: Institute of Personnel and Development.
e-reward.co.uk glossary
Even those with the deepest experience and mastery of the subject may not always be too familiar with some of the words and phrases being bandied about in this jargon-ridden area of management.
Here, for ready reference, e-reward.co.uk offers you its at-a-glance guide to definitions of 10 pay structure terms. If you have come across some other terminology that you don’ t understand, visit our glossary . . .
www.e-reward.co.uk/content/glossary.html
1 Anchor rate: A term used in broadbanded pay structures to describe the rate for a fully-competent person in a role which is aligned to market rates for that role in accordance with the organisation’ s pay stance.
2 Band architecture: The design of a broad band in terms of the use of anchor rates and zones.
3 Broadbanding: The compression of a hierarchy of pay grades or salary ranges into a small number (typically four or five) of wide bands. Each of the bands will therefore span the pay opportunities previously covered by several separate pay ranges. The US literature tends to identify two distinct approaches to broadbanding: broad grades and career bands.
4 Broad grades: The more conventional approach to broadbanding which simply collapses a number of salary bands into fewer grades or bands (typically seven or eight, with range spreads of 50%) but retains many of the traditional features and controls of conventional grading structures — including zones or bands within bands , mid-point management, compa-ratios and pay matrices.
5 Career bands: A term used most frequently in the US for bands in a broadbanded structure with a limited number of bands (typically five or less, with range spreads averaging 150%). The term expresses the philosophy of broadbanding which rewards people for lateral career development.
6 Fat grades: A somewhat derogatory term used for structures which are described as being broadbanded, but because of the number of grades (say, ten or more), the width of the pay ranges (40% to 50%), and the ways in which they are described and managed, are practically indistinguishable from grades in a conventional structure.
7 Job family: A group or cluster of jobs with common characteristics. Although the level of responsibility, skill or competence required to undertake the work may differ, the essential nature of the activities carried out and basic skills used are, nonetheless, similar. There are two main forms of job family: functional — cover specific work groups within an area, such as marketing, finance or personnel generic — cover similar types of work across functional boundaries — for example, professional staff, administrators, managers or team leaders.
8 Job family pay structure: A pay structure which contains separate pay structures for each of the job families which may be graded in terms of levels of skill or competence. Each level may have its own finite pay range, as in a conventional graded pay structure.
9 Pay curve: A type of pay structure associated with the development of job family structures and competence-based evaluation. Pay curves provide different pay progression tracks along which individuals in a job family progress according to their levels of performance and competence.
10 Zone: A term used in broadbanded pay structures to provide an indication of the extent to which the pay of individuals in a particular role or cluster of roles can vary around a datum point or anchor rate. Zones are designed to provide guidance to line managers and compensation specialists on pay decisions. They are not rigid pay ranges as in a conventional graded structure.
Survey details
Title: Study of broadbanded and job family pay structure , IPD survey report 11.
Methodology: based on a questionnaire completed by 193 respondents, and 15 case-study interviews, held primarily with pay and benefits managers.
Availability: contact the Institute of Personnel and Development, tel: 020 8263 3828
Want to know more?
For more information on pay structures, visit our reward section — a series of practical guides to key compensation and benefits issues:
Broadbanding:www.e-reward.co.uk/content/broadbanding.html
Job families:www.e-reward.co.uk/content/job-family.html
Pay structures:www.e-reward.co.uk/content/pay-structures.html
The IPD's web site is just one click away . . . www.ipd.co.uk