What is a Grading Structure?
A grading structures is a means of creating a structure of jobs in an organisation by reference to an indicator of complexity, market value or business needs.
Jobs which have similar attributes are grouped into the same grade. Each of the grades will then have its own pay band, that is the minimum and maximum that would normally be paid in the grade. Grades may also determine other differences in remuneration, such as cars, pension, flexible benefits etc.
Why have a Grading Structure?
The two main reasons are the benefit to the organisation and the benefit to the employees. For organisations it provides a framework within which it can take pay decisions on a consistent and fair basis. It also allows the organisation to manage pay budgeting more effectively. From an employees perspective it creates a fairer environment in which they can see the reason some people are paid more than others and will also facilitate an employee’s understanding of pay and career progression.
What types of grading structure are there?
Wide or broad band structures - these are where there are a limited number of grades and a number of different jobs fall in the same grade. While wide band structures have advantages as it is easier to ‘fit’ jobs into grades, there are more complexities when linking to the pay grades and ensuring equality and a lack of gender or other bias. Also when creating the grade descriptor to describe the generic features of the jobs in the grade, these descriptors tend to be ‘superficial’.
Narrow band structures - these are where there are more grades and fewer different types of jobs per grade. The advantage of this approach is that the jobs in each grade are more likely to be similar and hence it will be easy to create grade descriptors for each grade that is more refined.
Career and / or job families. This approach is unlike wide or narrow banding. With wide or narrow banding each grade will have jobs that are of the same or similar level but which can be of very different types, manufacturing, office, technical etc. With career / job families the job family will be a group of jobs that have similar requirements a, skills and abilities. An example of a job family is therefore finance, customer services etc. When career and / or job families are linked to pay then it creates a matrix where you have job level on one axis and job family on the other.
Composite structures - are structures where a combination of arrangements are used such as a broad band structure with a job family overlay.
With any grading structure it will be necessary to have some way of creating the hierarchy of job, which job is more complex than another. The most simple and common way to do this is by having a job evaluation scheme. Such scheme look at a number of the attributes and scores of each job against those attributes. The score provides the raw hierarchy in an organisation (and shows which jobs, even though very different in type have the same level of complexity). Other approaches include a paired comparison approach where each job is compared to other jobs above and below until a hierarchy is agreed.
A robust grading structure provides many benefits. It provides a structure for employees to understand the level of pay they receive, to understand possible career progression and to support equality with in the organisation. For an organisation a grading structure provides ground rules for recruiting and promoting staff as well as allowing more effective long term pay planning.
Grading structures, by their definition provide a structure and this structure can sometimes be at odds with an organisations business needs or what the market is doing for particular jobs. Structure can be seen as rigidity. However, there are many ways to counter these issues including the use of market supplements etc.
What is the Process
When assisting organisations we firstly try and understand the organisations hierarchy and jobs (job descriptions help in this context but we can work with what ever the organisation has). Ideally a job evaluation scheme provides clear transparent and objective information on the hierarchy. If not we will work with the organisation and what information there is to look to ‘group’ the jobs together that have the same attributes. Sometimes we will take benchmark data to understand the pay levels for the jobs in the organisation and then overlay the information with our knowledge of similar jobs in similar organisations to create a draft hierarchy. We then use a modelling tool in interactive discussions with the organisations to produce a grading structure be that wide, narrow or other. The modelling process will highlight any anomalies and we can then discuss how these are best dealt with. This can form part of remuneration policy or operating guidelines. The model then allows for financial cost modelling and to review the career and pay progression of the organisation.
Contact us for no a obligation discussion about your needs and objective or for further details.