Broadbanding

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What is broadbanding?

Broadbanding is a compensation approach consolidating a range of similar job classifications into a single pay band. This encompasses a much broader range of compensation levels than traditional salary structures and results in reducing the number of salary grades.

A traditional salary band usually has a spread of 25-60% in its single-step grade structure, whereas a broadband structure can almost double that in the low-end and high-end scales. A broadband approach gives management a wider range and flexibility to pay employees. 

This approach is more common in industries where employees tend to stay within the same companies and expand on their skills and training to move up within the same band.

These companies tend to have a wider variety of employees, jobs, and skill sets. Broadband pay structures often have an 80 to 300 percent minimum to maximum pay span. This makes it suitable for types of industries like healthcare or restaurant chains.

Traditional Salary Structure vs. Broadbanding

What are the objectives of broadbanding?

  • Offering flexibility in employee compensation
  • Encouraging employees to acquire new skills to move higher within the pay range
  • Reducing the need for pay band reclassification

Broadbanding example

As an example, a finance department might combine all of its jobs into a single entry "finance" band. This allows for compensation ranges for all roles to be from the least-skilled finance job to the highest-skilled job.

The median salary is $60,000, and the range is 80% to 180% of the median. The minimum salary then is $48,000, and the maximum is $108,000.

What are the advantages of broadbanding?

  • It encourages internal mobility within the organization. Because an employee is likely to stay in a specific job band for longer, it pushes them to take on new projects, learn new skills, and take on stretch tasks to receive a pay increase. 
  • The hierarchy of an organization is streamlined. Broadbanding reduces the number of levels in an organization and creates space for lateral moves. 
  • It increases employee satisfaction, as some employees are deep specialists. Thus, further advancement into an employee's career means they do not have to get promoted. Their salary can increase without the need to become a manager (which is not the desire of all employees).
  • It is easier to administer. Broadbanding is flexible and gives managers a greater ability to reward their employees without the continuous need to promote them in order to provide more financial incentives.

What are the disadvantages of broadbanding?

  • It does not always take into consideration external salary benchmarks and changes to external market conditions.
  • It reduces the opportunities for promotion. It might go against the work culture in some countries where employees tend to expect promotions more frequently than in other countries.
  • It can create pay inequity among employees.

How to move from traditional salary ranges to broadbanding

Here are the key elements to successfully implement broadbanding in your organization:

  1. Review your current compensation structure. Evaluate the pay policies and strategies you have in place at the moment to determine how you could transition to a broadbanding pay structure.
  2. Ensure that your job evaluation system is credible. This should happen before you implement broadbanding, so that when you classify jobs into bands, it is accurate and fair. 
  3. Put jobs of equal value in one band. This ensures consistency and a feeling of fairness in the organization. External auditors also regularly verify the bands, so it is a good idea to document them clearly.
  4. Involve all relevant stakeholders. The compensation and benefits team should ensure to involve HR, management, and even employees when developing the bands. Communication is key, and explaining a broadband structure is easier when more people are involved in creating it.
  5. Develop clear policies around your broadband structure. This policy could include information on how employees can earn a raise within their pay band, how moving from one broadband to another works, etc.

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