A pay grade refers to a system of pre-determined salary levels that is reserved for different designations within an organization. So, an individual employee’s pay grade would be the specific level of monetary compensation they are at in the company’s salary structure.
A pay grade is determined for employees based on their job role, qualifications and experience. A pay grade can also define the authority of a job. Pay grades often play a significant role in determining total labor costs, employee benefits, and even how well an employee performs in their role.
An employee also has the freedom to work their way up the pay scale into ascending pay grades when the company’s management approves a salary increase based on factors like merit, performance ratings, amount of experience, or length of employment.
A pay grade structure should ideally consist of the following elements:
An individual employee’s pay grade is determined by:
Employees can advance into a higher pay grade, by going though performance reviews, promotions and skill development. At times, changing market factors can also play a part in advancing to higher pay grades.
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