 | The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. (September 2017) |
A pay band is sometimes used to define the range (band) of compensation given for certain roles. The range is based on factors like location (high vs low cost of living locations), experience, or seniority.
Pay bands (sometimes also used as a broader term that encompasses several pay levels, ranges or grades) is a part of an organized salary compensation plan, program or system. In an organization that has defined jobs, pay bands are used to distinguish the level of compensation given to certain ranges of jobs to have fewer levels of pay, alternative career tracks other than management, and barriers to hierarchy to motivate unconventional career moves. For example, entry-level positions at a landscaping company might include truck drivers and laborers. Those jobs and those of similar levels of responsibility might all be included in a named or numbered pay band that prescribed a range of pay, (e.g. Band 1 = $10–17 per hour). The next level/classification of a group of similar jobs would include increased responsibility, and thus a higher pay band (e.g. Band 2 = $13–21 per hour).
Organizing pay structures in a pay band manner allows for overall control at the management level of an organization, while still giving some discretion for supervisors to reward good performance, and keeping within a reasonable compensation budget structure.