Sample Pay Grade Assignment Guidelines

Sample_Documents

DISCLAIMER: This is a sample template provided for informational purposes only. It does not constitute legal, tax, or financial advice. Organizations should consult their own legal and tax advisors and tailor this document to reflect their specific business needs, geographies, and applicable laws.

Pay Grade Assignment Guidelines

Document Header

Item	Details
Document Type	Pay Grade Assignment Guidelines
Category	Base Compensation
Company	<Company Name>
Version	<Version Number>
Effective Date	<Date>
Last Review Date	<Date>
Next Scheduled Review	<Date> (annual or semi-annual)
Document Owner	<Total Rewards Leader Title> (e.g., Head of Total Rewards)
Document Approver(s)	<Executive Sponsor Title>, <Legal Department Representative>, <Finance Representative>
Geographic Scope	<Country>, <Region>, Global
Systems in Scope	<HRIS Name>, <Compensation Planning Tool>, <Vendor Name> survey portal

Purpose and Objectives

• Define the standardized methodology for assigning jobs to pay grades within <Company Name>.
• Promote market competitiveness, internal equity, and pay-for-role consistency.
• Provide guidance for new roles, reorganizations, promotions, demotions, transfers, and market recalibrations.
• Establish governance, documentation, and approval requirements to ensure compliance with <Country> and local laws.
• Enable scalable, auditable, and repeatable processes supported by <HRIS Name> and compensation planning tools.

Scope and Applicability

• In Scope
  • All regular employees of <Company Name> paid on a base salary or hourly wage.
  • Corporate, technical, and operational roles across all functions and locations within the stated geographic scope.
  • Base pay grades, range structures, grade assignment methodology, and related governance.

• Out of Scope
  • Variable pay design (annual incentives, sales incentives, long-term incentives) except as described for grade linkage.
  • Union roles governed by collective bargaining agreements where compensation is set by contract.
  • Independent contractors, interns, and temporary staff engaged via third parties.
  • Country-specific statutory pay rules that supersede these guidelines; country addenda will apply.

Guiding Principles

• Market-Relevant: Pay structures are anchored to external market data at the targeted market percentile(s) defined by <Company Name> (e.g., median or 50th percentile for most roles; higher targets for critical skills).
• Internally Equitable: Jobs with comparable scope and complexity are assigned to the same or adjacent grades across functions and regions, subject to geographic differentials.
• Role-Based: Grade assignment is based on the role, not the incumbent.
• Transparent and Defensible: Decisions are documented, consistent, and auditable.
• Compliant: All practices comply with applicable pay equity, transparency, and wage-and-hour laws in <Country> and other jurisdictions.
• Practical and Scalable: Processes support growth, acquisitions, and new geographies with efficient governance.

Key Roles and Responsibilities

Total Rewards (Compensation)

• Owns methodology, tools, and training for job evaluation and pay grade assignment.
• Manages market data sources, aging factors, and geographic differentials.
• Builds and maintains salary structures and range values; proposes annual updates.
• Reviews and approves grade assignments, exceptions, and regrades per approval matrix.
• Partners with Legal and HRBPs on compliance and pay equity considerations.
• Maintains documentation repository and audit logs.

HR Business Partners (HRBPs)

• Facilitate job analysis with managers to ensure accurate role definitions.
• Submit grade assignment requests with required documentation.
• Communicate outcomes and rationale to managers and employees in alignment with Total Rewards.

Hiring Managers and People Leaders

• Provide accurate job content, scope, and requirements.
• Use approved job descriptions and evaluation criteria.
• Adhere to hiring and offer guidelines aligned with assigned pay grade.

Finance

• Verifies affordability, headcount plans, and budget alignment for new or regraded roles.
• Collaborates on financial impacts of structure updates.

Legal and Compliance

• Advises on pay transparency, pay equity, and local legal requirements.
• Reviews exceptions with potential compliance risk.

HR Operations and HRIS

• Implements approved grades and related attributes in <HRIS Name>.
• Ensures effective dating, workflow controls, and data integrity.

Pay Structure Overview

Structure Design

• <Company Name> uses a job-grade salary structure with defined minimum, midpoint, and maximum for each grade.
• Range spreads (max to min) are calibrated by career level and labor market dynamics. Illustrative norms:
  • Entry/Support: 30% to 40%
  • Professional/Individual Contributor: 40% to 50%
  • Management: 50% to 60%
  • Executive: 60% to 80%
• Midpoint progressions between adjacent grades typically range from 8% to 15%, increasing at higher levels.
• Structures may be differentiated by job family (e.g., technical, sales, operations) and by geography via location-based pay differentials.

Market Positioning

• Default market anchor: <Percentile> (e.g., 50th percentile) of composite market data for benchmark roles.
• For critical skills or high-demand markets, target may be set at <Percentile> (e.g., 60th or 65th percentile) subject to approval.

Geographic Differentials

• Base grade structures are defined for a reference market (e.g., <Country> National). Location-specific structures apply differentials expressed as percentages of reference pay:
  • Example: <City A> +<Percentage>, <City B> +<Percentage>, <Region C> -<Percentage>.
• Differentials are reviewed annually or when cost-of-labor indices shift by <Percentage> or more.

Linkages to Other Programs

• Eligibility for variable pay programs (annual bonus, LTI) may be tied to grade. Refer to <Related Policy Name>.
• Allowances or premiums (e.g., on-call, shift) do not change grade but are governed by separate policies.

Market Data and Benchmarking Methodology

Data Sources

• Primary sources: Published, audited compensation surveys from <Vendor Name>, <Vendor Name>, and <Vendor Name>.
• Secondary sources: Custom cuts, industry peer panels, and specialized niche surveys where relevant.
• Public or self-reported sources are not used for grade setting unless validated and approved by Total Rewards.

Data Matching and Selection

• Jobs are matched to survey benchmarks based on primary purpose, scope, impact, required knowledge, and minimum qualifications.
• When no direct match exists, composite matches using multiple survey roles are weighted to reflect the role’s content.
• Survey data are aged to <Date> using an annual update factor of <Percentage> (e.g., 3.0% to 4.0%) and pro-rated by months.

Currency and Exchange

• All market data are converted to the payroll currency of the relevant structure using the <Company Name> treasury rate effective <Date>, with sensitivity checks for volatility.
• For high-inflation markets, data may be adjusted using a rolling average over <Number> months.

Outliers and Sample Size Controls

• Minimum participating company count for a valid data point: <Number> (e.g., 10).
• Outlier handling: Use interquartile range rules; exclude data beyond <Number> IQRs if materially distorting.

Market Composite Rules

1. Identify up to <Number> best-fit survey matches per role.
2. Assign weights totaling 100% based on relevance and sample size.
3. Select the market target percentile(s) based on the role strategy.
4. Calculate the composite market value; apply aging and currency adjustments.
5. Compare to internal midpoint; recommend midpoint updates or grade adjustments.

Job Evaluation and Slotting Methodology

Job Architecture Alignment

• Grade assignment is anchored to <Company Name>’s job architecture, including job families and career levels (e.g., Entry, Intermediate, Senior, Lead, Manager, Director).
• Leveling criteria consider:
  • Business impact and scope (revenue, budget, headcount).
  • Problem solving and decision-making autonomy.
  • Knowledge, experience, and skills required.
  • Communication, influence, and leadership scope.
  • Risk, accountability, and complexity.

Evaluation Methods

• Simplified global leveling guide with narrative descriptors for each career level.
• Point-factor or content evaluation (optional) with factors weighted to total <Points Total> points; factor weights and points calibrated in design phase.
• Market-pricing override: Where robust market data materially diverge from internal evaluation, market pricing may inform grade placement with justification.

Slotting Procedure

1. Confirm job description accuracy and completeness.
2. Match the role to survey benchmarks and confirm market composite.
3. Evaluate against leveling criteria; propose grade range(s).
4. Conduct internal equity check against comparator roles.
5. Document proposal in the grade assignment form; attach evidence.
6. Route for approvals per the matrix; implement upon final approval.

Grade Assignment Rules

New Roles

• A new role must include a finalized job description, expected scope, and reporting line.
• Total Rewards validates market data and recommends grade(s), documenting rationale.
• If the role is experimental or short-term, consider a temporary grade assignment with review at <Date> or after <Number> months.

Promotions and Reclassifications

• Promotions occur when there is a sustained and material increase in scope aligned with a higher career level.
• Recommended promotional increase ranges:
  • One grade promotion: <Percentage> to <Percentage> (e.g., 8% to 12%) or to at least the new range minimum, whichever is higher.
  • Multi-grade promotion: <Percentage> to <Percentage> (e.g., 12% to 18%), subject to budget and internal equity.
• Retroactive promotions are discouraged and require exception approval.

Lateral Moves and Transfers

• Moves within the same grade are generally lateral; base pay changes are not typical unless justified by internal equity or geographic differential changes.
• Transfers across geographies may trigger application of location differentials while preserving grade or mapping to the local structure equivalent.

Demotions and Organizational Changes

• Involuntary demotions due to reorganization or role elimination should maintain pay within policy limits. Options include red-circling pay until range catches up or decrement not to exceed <Percentage> per policy.
• Voluntary demotions may adjust pay to within the new grade range, typically to a compa-ratio of <Percentage> to <Percentage>.

Internal Equity and Comparator Set

• Identify a comparator set of <Number> to <Number> roles with similar scope in the function and adjacent functions.
• Resolve significant misalignments where compa-ratios differ by more than <Percentage> without documented rationale.

Compa-Ratio and Range Penetration Guidance

Definitions and Use

• Compa-ratio = Employee base pay divided by range midpoint, expressed as a percentage.
• Range penetration = Position of base pay between range minimum and maximum.
• Typical target compa-ratio bands:
  • Developing: 80% to 90%
  • Fully Proficient: 95% to 105%
  • Expert/Tenured: 105% to 115%
• Pay decisions should target the compa-ratio that matches incumbent proficiency and sustained performance.

Examples (Illustrative)

• Range midpoint: <Amount>; Employee pay: <Amount> ⇒ Compa-ratio: <Percentage>.
• Range min/max set at 80%/120% of midpoint unless otherwise specified.

Exceptions and Approval Matrix

Standard Exceptions

• Offers above range maximum.
• Promotions exceeding recommended increase guidelines.
• Market adjustments placing pay beyond 115% compa-ratio.
• Regrades affecting more than <Number> incumbents or with total cost impact exceeding <Amount>.

Approval Requirements

1. HRBP and Total Rewards review for all exceptions.
2. Finance approval required for cost impacts ≥ <Amount> or budget variances ≥ <Percentage>.
3. Legal review for scenarios with pay equity or transparency implications.
4. Executive sponsor approval for structural changes (new grade creation, midpoint methodology changes).

Documentation Requirements

Required Artifacts

• Completed grade assignment form with job description, market data summary, leveling assessment, comparator set, and recommended grade.
• Market data extracts including benchmark matches, weights, aging factor, and composite percentile.
• Internal equity analysis with current compa-ratios of comparators.
• Approval record with names, dates, and any conditions.

Record Retention

• Retain grade assignment documentation for at least <Number> years or as required by <Country> law.
• Store records in <System/Repository Name> with controlled access.

Implementation Guidelines

HRIS Setup and Effective Dating

1. Upon approval, HR Operations assigns the grade code in <HRIS Name> with an effective date of <Date>.
2. Update linked eligibility flags (e.g., bonus, LTI) based on the grade.
3. Validate downstream integrations to payroll and compensation planning tools.
4. Confirm location differential application if applicable.
5. Verify reporting and analytics alignment (dashboards, headcount reports).

Change Control

• All grade changes must reference the approved request ID.
• Retroactive changes beyond <Number> payroll cycles require Finance and Legal approval.
• Use test environments for bulk regrades to validate data integrity before production.

Structure Review and Maintenance

Annual Review Cycle

1. Review external market movement using updated surveys from <Vendor Name> and <Vendor Name>.
2. Propose structure movement (e.g., range midpoint shift of <Percentage>) and, if needed, spread changes.
3. Model cost impacts including compa-ratio drift and anticipated merit budgets.
4. Obtain approvals and publish updated structures with effective date <Date>.
5. Communicate changes to HR and managers; update job catalogs and guides.

Off-Cycle Triggers

• Significant market dislocation in a critical job family (e.g., ≥ <Percentage> movement within <Number> months).
• Legal or regulatory changes (e.g., minimum wage adjustments, pay transparency requirements).
• Business events: acquisitions, divestitures, large-scale reorganizations.

Pay Equity, Legal, and Compliance Considerations

Pay Equity Audits

• Conduct at least annual pay equity analyses controlling for legitimate factors (grade, tenure, location, performance, skills).
• Remediate statistically significant unexplained differentials with targeted adjustments and process fixes.

Transparency and Disclosure

• Adhere to pay transparency laws in <Country> and local jurisdictions when posting ranges in job ads and providing candidate disclosures.
• Provide employees with their assigned grade, range, and an explanation of how grades are determined upon request.

Wage and Hour Compliance

• For roles subject to overtime rules, ensure proper classification and grade mapping to hourly structures.
• Minimum wage floors and statutory adjustments override range minimums where higher.

Legal Disclaimer

• These guidelines do not form a contract of employment and may be modified at <Company Name>’s discretion in compliance with applicable laws.

International and Geographic Considerations

Global Framework, Local Flexibility

• Maintain a global structure philosophy with localized application for each country:
  • Local market data sources vetted for robustness and compliance.
  • Currency conversion and inflation handling documented per country.
  • Country addenda for statutory requirements.

Mobility and Transfers

• When relocating employees across countries or differentials:
  • Map grade equivalency to local pay structures.
  • Reassess variable pay eligibility rules by country.
  • Apply cost-of-labor, not cost-of-living, unless policy specifies otherwise.

Mergers, Acquisitions, and Integrations

Due Diligence

1. Inventory target company jobs, pay practices, and structures.
2. Identify benchmark overlap and gaps relative to <Company Name> job architecture.
3. Assess risk areas (pay equity, compliance, contractual guarantees).

Integration Approach

• Choose from phased mapping, big-bang transition, or hybrid by function.
• Honor legal requirements and contractual obligations; define exception periods.
• Communicate clearly to acquired employees with transition timelines and support resources.

Cost Management and Budgeting

Planning Inputs

• Merit budget assumption: <Percentage>.
• Structure movement assumption: <Percentage>.
• Promotion budget: <Percentage> of annual payroll or <Amount>.

Guardrails

• Total cost of exceptions capped at <Percentage> of payroll per fiscal year without CFO approval.
• Regrades impacting more than <Number> employees require a financial impact assessment.

Quality Assurance and Audit

Controls

• Pre-implementation quality checks on grade and range data in <HRIS Name>.
• Quarterly audit of a sample of grade assignments for policy adherence.
• Access controls restricting grade changes to authorized roles only.

Metrics and Reporting

• Distribution of compa-ratios by grade and location.
• Time-to-approve grade assignments.
• Percentage of exceptions vs standard assignments.
• Pay equity indicators and remediation progress.

Training and Enablement

Audience-Specific Materials

• Managers: Guides on interpreting ranges, making offers, and managing equity.
• HRBPs: Deeper training on job evaluation and market data usage.
• Total Rewards Analysts: Technical training on survey participation and structure modeling.

Certification and Access

• System access to initiate grade changes requires completion of <Course Name> by <Date> and recertification every <Number> months.

Sample Reference Tables

Illustrative Grade Structure (Placeholders)

Grade	Range Minimum	Midpoint	Range Maximum	Spread	Midpoint Progression
P1	<Amount>	<Amount>	<Amount>	<Percentage>	<Percentage>
P2	<Amount>	<Amount>	<Amount>	<Percentage>	<Percentage>
P3	<Amount>	<Amount>	<Amount>	<Percentage>	<Percentage>
M1	<Amount>	<Amount>	<Amount>	<Percentage>	<Percentage>
M2	<Amount>	<Amount>	<Amount>	<Percentage>	<Percentage>
D1	<Amount>	<Amount>	<Amount>	<Percentage>	<Percentage>

Example Grade Assignment Decision Matrix (Illustrative)

Criteria	Weight	Evidence Examples
Market Composite Match Quality	<Percentage>	Number of valid benchmarks, sample size, data aging
Leveling Guide Alignment	<Percentage>	Scope, impact, autonomy, leadership
Internal Equity Fit	<Percentage>	Comparator set compa-ratios and adjacency
Geographic Differential	<Percentage>	Reference vs local structure alignment
Business Criticality	<Percentage>	Retention risk, scarcity, strategic importance

Review and Approval Process

Workflow Summary

1. Initiate: Manager and HRBP submit grade assignment request with required documents.
2. Evaluate: Total Rewards conducts market pricing and leveling review.
3. Recommend: Total Rewards proposes grade and, if needed, range variance.
4. Approve: Route via approval matrix including Finance and Legal as required.
5. Implement: HR Operations updates <HRIS Name> and notifies stakeholders.
6. Confirm: Reporting validation and audit trail completion.

Effective Dates

• Standard effective date is the first day of the nearest payroll period after final approval, unless business needs justify <Date>.
• Retroactive dates beyond <Number> days require exception approval.

Version Control

• Each update to these guidelines increments the version and documents changes in the revision log with date and approver.

Glossary of Terms and Definitions

Terms

• Benchmark Job: A role with commonly available market data used to anchor pay decisions.
• Career Level: A defined layer within the job architecture representing scope and complexity.
• Compa-Ratio: Employee base pay divided by the range midpoint.
• Geographic Differential: Adjustment applied to reflect local cost-of-labor differences.
• Grade: A band within the salary structure with defined minimum, midpoint, and maximum.
• Internal Equity: Relative fairness of pay across comparable roles within <Company Name>.
• Midpoint Progression: Percentage increase in midpoints between adjacent grades.
• Range Spread: Percentage difference between range minimum and maximum.
• Red-Circle: Pay above the range maximum that is frozen or limited in increase until the range catches up.
• Structure Movement: Planned adjustment to salary range values to reflect market changes.

Communication to Employees and Managers

Understanding Your Pay Grade at <Company Name>

Your pay grade helps you understand how your base pay compares to the market and to similar roles inside <Company Name>. Each grade has a minimum, midpoint, and maximum. Most employees progress within their grade as they build capability and demonstrate sustained performance.

How we set grades We study reliable market pay data from established sources and compare jobs by scope, responsibilities, and required skills. We group similar jobs into grades so we can pay consistently and fairly across teams and locations. We also check for internal equity to make sure roles with similar impact are treated similarly.

What your grade means Your grade reflects the role you perform, not your personal worth. Within a grade, employees may be at different points in the range based on experience, proficiency, and sustained performance. If you are newer to a role, your pay may be closer to the range minimum. As you gain experience and deliver results, your pay can move toward the midpoint and beyond, subject to budget and policy.

How changes happen Changes to your grade usually occur when your job changes meaningfully. Examples include a promotion to a higher-level role, or a reorganization that changes the scope of your job. Routine performance reviews may change your pay within your current grade but do not change your grade level.

Offers and promotions When we hire or promote, we consider the role’s grade, market conditions, your experience, and internal equity. We aim to make offers within the grade range. Sometimes we grant exceptions with additional approvals when the market is moving quickly or the role is highly specialized.

Location and pay If you work in different locations, your pay may reflect local labor market conditions. We use geographic differentials to apply consistent, data-driven adjustments across locations. If you move to a new location, we will review your pay and explain any changes.

Your questions are welcome If you want to know your grade, your range, or how we made a decision, please ask your manager or HR Business Partner. We support open, respectful conversations about pay. While we may not be able to share every market detail, we will explain our process and how it applies to your role.

Commitment to equity We regularly review pay to identify and address any unexplained differences. If we find issues, we act to correct them. Our goal is a fair, competitive, and transparent pay program aligned to our values.

Where to find more information

• Your job profile in <HRIS Name> shows your grade and career level.
• The Compensation Overview on <Intranet Site Name> explains how ranges work and our annual review timeline.
• For specific questions, contact <Total Rewards Mailbox> or speak with your HR Business Partner.

Important notes These guidelines may change as our business and markets evolve. Local laws may require us to adapt our approach in certain locations. If this happens, we will communicate what it means for you.

Frequently Asked Questions (FAQ)

• How do I find my pay range?
  • You can view your range in <HRIS Name> or request it from HR. We provide the minimum, midpoint, and maximum for your grade and location.
• Can my pay exceed the range maximum?
  • In limited cases, yes. We may temporarily freeze increases until the range adjusts or your role changes.
• What if I take on more work without a title change?
  • If your role’s scope has materially increased and is sustained, talk with your manager and HRBP. We will review the job content and determine whether a regrade is appropriate.
• Will my pay change if I relocate?
  • Possibly. If the new location has a different pay differential, we will adjust your pay according to policy and explain the change.
• How often are ranges updated?
  • We review market data at least annually and may update ranges when market movement or laws change.

Contact and Support

• For questions about your grade or pay, contact <Total Rewards Mailbox>.
• For policy questions, review the Compensation pages on <Intranet Site Name> or speak with your HR Business Partner.
• For legal or compliance inquiries, contact <Legal Mailbox>.

Closing Message

Thank you for the work you do at <Company Name>. Our goal is to provide a fair, competitive, and transparent pay program that recognizes your contributions and supports your growth.

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Document Information:

• Document Type: Pay Grade Assignment Guidelines
• Category: Base Compensation
• Generated: August 22, 2025
• Status: Sample Template
• Next Review: <Insert Review Date>

Usage Instructions:

1. Replace all text in angle brackets < > with your company-specific information
2. Review all sections for applicability to your organization
3. Customize content to reflect your company's policies and local regulations
4. Have legal and HR leadership review before implementation
5. Update document header with your company's version control information
6. At bottom of the document you find a short example on how the content could be communicated to end-users, for instance employees.

This sample document is provided for reference only and should be customized to meet your organization's specific needs and local legal requirements.