Sample Salary Administration Policy

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.

Salary Administration Policy

Document Type: Salary Administration Policy

Category: Base Compensation

Policy Title	Salary Administration Policy
Company	<Company Name>
Version	<Version Number>
Effective Date	<Effective Date: <Date>>
Last Review Date	<Date>
Next Scheduled Review	<Date> or annually in <Month>
Policy Owner	<Owner Title: e.g., VP Total Rewards>
Policy Sponsor	<Sponsor Title: e.g., CHRO>
Approved By	<Approver Committee or Title> on <Date>
Geographic Applicability	<Countries/Regions>
Related Documents	Job Architecture Framework, Global Mobility Policy, Variable Pay Policy, Performance Management Policy
Confidentiality	Internal Use Only

Purpose and Objectives

Provide a consistent, equitable, and market-competitive approach to base salary administration across <Company Name>.
Align salary practices to business strategy, performance, internal equity, and market competitiveness.
Define the design, maintenance, and governance of salary structures and range movements.
Establish standardized processes for hiring rates, merit increases, promotions, lateral moves, demotions, and equity adjustments.
Ensure compliance with applicable pay equity, wage, and working time regulations in <Country> and other relevant jurisdictions.
Enable transparent and effective communication to employees and managers.

Scope and Applicability

In Scope

All regular employees of <Company Name> in <Countries/Regions> receiving base salary.
Salary structures, grades/bands, and pay ranges.
Annual salary review (merit cycle) and off-cycle base pay changes.
New hire offers, promotions, lateral moves, and demotions affecting base pay.
Geographic pay differentials and currency practices for salaried roles.

Out of Scope

Variable compensation, including short-term and long-term incentives.
Sales incentive compensation plans.
Hourly wage administration where a separate Hourly Pay Policy is in effect.
Benefits, recognition, allowances, perquisites, and equity compensation plans.
Collective bargaining agreements, which take precedence where applicable.

Applicability

This policy applies to <Company Name> employees unless local law, a collective agreement, or a specific employment contract requires otherwise.
Where conflicts arise with local law, local law prevails and the policy will be applied to the maximum extent permissible.

Guiding Principles

Market-Competitive: Pay ranges are anchored to robust external market data and refreshed on a regular cadence.
Performance-Differentiated: Merit increases reflect performance and position in range.
Internally Equitable: Pay decisions consider role scope, experience, and comparable internal peers.
Transparent and Understandable: Policies and processes are clear to managers and employees.
Governed and Compliant: Decisions follow documented approvals and comply with pay equity and wage regulations.
Pragmatic and Scalable: Processes are efficient, supported by systems, and scalable across geographies.

Key Concepts and Definitions

Job Architecture: The framework of job families, levels, and career paths used to classify roles and build pay ranges.
Salary Grade/Band: A level within the job architecture with an associated minimum, midpoint, and maximum base pay.
Pay Range: The minimum-to-maximum base pay for a grade/band, with a defined midpoint.
Midpoint Progression: The percentage increase between the midpoint of adjacent grades.
Range Spread: The percentage difference between range minimum and maximum within a grade.
Compa-Ratio: Employee’s base pay divided by the range midpoint (expressed as a decimal or percentage).
Market Ratio: Employee’s base pay divided by the market reference (e.g., market 50th percentile).
Geographic Differential: A percentage adjustment applied to pay ranges to reflect cost of labor differences across locations.
Merit Increase: An adjustment to base salary based on performance and positioning in range.
Promotion: Movement to a higher grade with expanded responsibilities, typically accompanied by a base salary increase.
Lateral Move: Change in role without a change in grade; may or may not include a base pay change.
Demotion: Movement to a lower grade; pay may be adjusted based on policy and local law.
Off-Cycle Adjustment: Non-annual base pay change to address equity, retention, or scope changes.

Salary Structure Design

Market Data Sources

<Company Name> uses reputable, audited compensation surveys such as <Vendor Name>, <Vendor Name>, and national statistical sources.
Market data are matched to jobs using job family, level, scope, and required skills, and reflect relevant labor markets in <Country/Region>.
The primary market reference point is the 50th percentile (P50); for critical or hard-to-fill roles, the target may range from P50 to P75.

Job Architecture and Grading

Roles are assigned to grades/bands using the Job Architecture Framework and an established job leveling methodology (e.g., career levels <L1–L10>).
Each grade has a defined range minimum, midpoint, and maximum. Typical range spreads and midpoint progressions are:
- Individual Contributor (early career): 30 to 40 percent spread; midpoint progression 8 to 12 percent.
- Professional/Senior IC: 40 to 50 percent spread; midpoint progression 10 to 12 percent.
- Manager/Leader: 50 to 60 percent spread; midpoint progression 12 to 15 percent.
- Executive: 60 to 80 percent spread; midpoint progression 15 to 20 percent.

Range Construction

Midpoints are anchored to market P50 for the role and location tier.
Range minimum and maximum are derived using the target spread for the level. Example:
- If midpoint is <Amount> and spread is 50 percent, then range min = midpoint / 1.25, range max = midpoint x 1.25.
Ranges may be adjusted for local market premiums/discounts, talent scarcity, and internal equity.

Geographic Pay Differentials

<Company Name> applies a cost-of-labor based approach. Locations are grouped into tiers with differentials relative to a Reference Location (e.g., <City, Country>).
Illustrative differentials relative to Reference Location = 100:
- Tier A: 115 to 125
- Tier B: 100 to 110
- Tier C: 85 to 95
- Tier D: 70 to 80
Location assignment and differentials are reviewed annually and upon significant market shifts.
Remote work pay is tied to the employee’s assigned work location per the Remote Work Policy.

Currency and Exchange Practices

Pay ranges are maintained in local currency where possible. For cross-border roles, reference currency is <Currency>.
Exchange rates for planning are set by Finance using <Vendor Name> rates effective <Date> and held constant during the cycle.

Pay Positioning Strategy

Target positioning is P50 of market for most roles; P60–P75 may be used for critical skills, with CHRO approval.
New hires typically placed between 85 to 100 percent compa-ratio for fully qualified candidates; above 100 percent requires additional approval and internal equity review.
Ongoing employees should generally progress toward the midpoint with growth in performance, skills, and experience.
Compa-ratio bands guide increase recommendations:
- Below 85 percent: prioritize market/equity increases.
- 85 to 100 percent: eligible for full merit per matrix.
- 100 to 115 percent: reduced merit per matrix.
- Above 115 percent: lump sum in lieu of base increase where legally permissible.

Salary Administration Processes

Annual Market and Range Review

Total Rewards gathers updated market data from <Vendor Name> by <Month>.
New midpoints are set using target market percentile by role and location tier.
Proposed range movements (e.g., 2 to 4 percent across-the-board or targeted by job family) are modeled against cost and compression risk.
Finance approves the structural cost and proposed merit budget envelope.
Leadership reviews and approves final ranges and budget; HRIS updates the system of record.
New ranges are effective on <Date> and communicated prior to the merit planning window.

Merit Planning Cycle

Performance ratings are finalized in <System Name> by <Date>.
Total Rewards publishes the merit matrix and planning guardrails to managers.
Managers submit recommendations within <Window: start Date to end Date>.
HRBPs review for policy alignment, equity, and budget adherence.
Approvals are completed by <Date> and files are sent to Payroll for processing.
Employees are notified of approved changes effective <Date>.

Illustrative Merit Matrix (for guidance only)

Compa-Ratio	Rating: Exceeds	Rating: Fully Meets	Rating: Partially Meets	Rating: Does Not Meet
Below 85 percent	6.0% to 8.0%	4.0% to 6.0%	0.0% to 2.0%	0.0%
85% to 100%	4.0% to 6.0%	3.0% to 4.0%	0.0% to 2.0%	0.0%
100% to 115%	2.0% to 3.0%	1.0% to 2.0%	0.0% to 1.0%	0.0%
Above 115%	0.0% to 1.0% or lump sum	0.0% to 1.0% or lump sum	0.0%	0.0%

Note: Values are illustrative and should be replaced with <Company Name>-specific percentages. Where base increases are not permitted due to range maximums or legal restrictions, a lump sum may be used where permitted.

Promotions, Laterals, and Demotions

Action Type	Definition	Increase Guidance	Other Requirements
Promotion (1 grade)	Movement up 1 grade with increased scope/responsibility	5% to 10% or to new range minimum, whichever is greater	Internal equity check; high compa-ratios may warrant lower increases
Promotion (2+ grades)	Movement up 2 or more grades	10% to 20% or to range minimum, whichever is greater	Requires CHRO approval; may stage if budget constrained
Lateral Move	Same grade; role change or skill growth	0% to 5% based on scope/market shifts	Avoid exceeding range max; use lump sum when appropriate
Demotion (voluntary)	Lower grade by employee request	Adjust to within new range; optional reduction of 0% to 10%	Comply with local law and employment contract
Demotion (involuntary)	Performance/discipline related	Adjust to within new range; typical reduction 5% to 15%	Coordinate with Legal and HRBP; follow due process

Promotions effective on the start of the pay period following approval, unless local law requires otherwise.
Promotions and demotions must consider minimum wage, pay equity, and contractual obligations in <Country>.

New Hire Offer Guidelines

Determine offer range using market data for the role and location tier, candidate experience, and internal equity among peers.
Typical placement for fully qualified candidates: 90 to 100 percent of midpoint; exceptional candidates up to 110 percent with approval.
Offers above 110 percent of midpoint or at/above range maximum require CHRO approval and a documented equity analysis.
Sign-on bonuses, if used, do not substitute for competitive base pay and should be justified with talent scarcity and retention considerations.

Off-Cycle Adjustments and Retention Increases

Permitted to address:
- Market movements outpacing structure.
- Internal equity or pay parity adjustments.
- Significant expansion in role scope outside the annual cycle.
- Critical retention risks with credible offers or documented market evidence.
Off-cycle adjustments must not compromise the annual merit budget without CFO approval.
Multiple off-cycle increases within 12 months require Total Rewards approval.

Range Maximums and Lump Sums

Base salaries should not exceed range maximum. Where pay is at or above maximum:
- No base increase will be applied; a lump sum may be provided in lieu, subject to budget and local law.
- Consider re-leveling, reassigning, or career growth paths if scope warrants.

Salary Effective Dates and Proration

Merit increases are effective on <Date> and prorated for employees hired or promoted after <Proration Date>.
New hire and promotion increases take effect on the start of the next pay period after final approval.
Leaves of absence, terminations, and retroactive changes follow Payroll cutoffs in <Country>.

Approvals and Delegations of Authority

Action	Threshold	Required Approvals
Merit Increase within matrix	Any	Manager, HRBP
Merit Increase above matrix but within range	Up to +<Percentage> over guideline	Manager, HRBP, Total Rewards
Offer above 110% of midpoint	Any	TA Lead, HRBP, Total Rewards, CHRO
Salary above range maximum	Any	CHRO and CFO
Off-cycle retention increase	Up to <Percentage>	Manager, HRBP, Total Rewards
Off-cycle retention increase	Above <Percentage>	CHRO and CFO
Demotion pay change	Any	Manager, HRBP, Legal

All approvals must be recorded in <System Name> with documented rationale.
Approver delegations require written authorization from the Policy Owner.

Roles and Responsibilities

Total Rewards

Design and maintain job architecture, ranges, and geographic differentials.
Source and validate market data and recommend annual range and budget changes.
Publish planning tools, merit matrices, and guardrails; audit outcomes for equity and compliance.
Advise HRBPs and managers on complex or exceptional cases.

HR Business Partners

Ensure policy adherence in their client groups; coach managers on recommendations.
Review equity, performance differentiation, and budget adherence; escalate exceptions.

People Managers

Make pay recommendations aligned with performance, market, and internal equity.
Communicate outcomes to employees clearly and timely.
Maintain confidentiality of compensation information.

Talent Acquisition

Develop offer recommendations consistent with internal equity and market data.
Coordinate approvals and ensure candidates receive accurate compensation information.

Finance

Set planning exchange rates and fund annual merit budgets.
Review cost impacts and ensure alignment to financial plans.

HRIS and Payroll

Configure ranges, eligibility rules, and effective dates in systems.
Process approved changes accurately and on schedule; maintain audit trails.

Legal/Compliance

Advise on legal requirements, including pay transparency, minimum wage, and equal pay laws in <Country/Region>.
Review demotions and sensitive cases; support audits and remediation plans.

Governance, Compliance, and Risk Management

<Company Name> complies with applicable pay equity, minimum wage, and working time laws in each jurisdiction where it operates, including pay transparency requirements where applicable.
Equal pay reviews are conducted at least annually and after major organizational changes, using statistically appropriate methods approved by Legal.
The policy prohibits unlawful discrimination based on protected characteristics under applicable law in <Country/Region>.
Any appearance of pay compression or inequity should be addressed using targeted adjustments during or outside the merit cycle.
Records of pay decisions, approvals, and rationales are retained for at least <Years> years, or longer where required by law.

Internal Equity and Pay Parity Reviews

Total Rewards conducts scheduled pay parity audits using factors such as grade, job family, location, tenure, and performance rating.
Findings and remediation plans are reviewed with Legal and HR Leadership; remediation adjustments may be phased to align with budget.
Managers must not rely solely on external offers to set pay; internal equity among similarly situated employees must be considered.

Implementation Guidelines

Introducing or Updating the Salary Structure

Confirm job architecture and complete role leveling in partnership with HRBPs and business leaders.
Select benchmark jobs and collect market data by location tier.
Set midpoints and construct ranges by grade; calibrate spreads and progressions by level.
Model cost, compression, and distribution of compa-ratios; refine as needed.
Obtain approvals from Policy Sponsor and Finance; finalize in HRIS.
Publish manager guides, FAQs, and communication materials; train managers before go-live.

Transition and Red-Circling

Employees exceeding new range maximums may be red-circled: base pay is frozen until range maximum exceeds current pay, subject to local law.
Employees below new range minimums should be brought to minimum no later than the merit effective date.

Data Quality and Controls

Conduct pre-cycle data validation for grades, ranges, locations, eligibility, and performance ratings.
Establish audit reports to monitor out-of-guideline actions, range boundary exceptions, and approval compliance.

Budgeting and Financial Planning

Annual merit budget is set as a percentage of salary spend (e.g., <Percentage> of eligible payroll), informed by market, inflation, and affordability.
Structural range movement (e.g., 2 to 4 percent) is planned separately from merit spend.
Promotion and equity pools may be budgeted separately (e.g., 0.5 to 1.0 percent for promotions; 0.3 to 0.7 percent for equity).

Special Topics

Pay for Skills and Certifications

Where critical skills add measurable value, pay positioning may exceed standard guidelines with Total Rewards approval.
Skill premiums should be embedded into base only when skills are sustained and essential to the role.

Global Mobility and Assignments

Base salary treatment for assignees follows the Global Mobility Policy. Home-country salary structures typically apply, with allowances managed separately.
Currency conversion and cost-of-labor alignment are coordinated with Mobility, Finance, and Total Rewards.

Pay Transparency and Posting Ranges

Where required, job postings will include pay ranges for the assigned work location and a brief explanation of factors that influence an offer.
Posting ranges are derived from the approved salary structure and may vary by location tier.

Review and Approval of This Policy

Total Rewards drafts updates and assesses impacts to process, systems, and budget.
Legal reviews for compliance with evolving laws in <Country/Region>.
Finance reviews funding and financial implications.
HR Leadership and CHRO approve final changes.
The updated policy is published to <Intranet Site> and communicated to managers and employees.
Effective date of revisions is specified in the Document Header; superseded versions are archived.

Metrics and Continuous Improvement

Key metrics reviewed after each cycle:
- Distribution of increases by rating and compa-ratio.
- Percentage at or above range maximum.
- Internal equity indicators and remediation progress.
- Budget adherence and cost variance.
- Time-to-approve and exception rates.
Total Rewards will recommend policy or process changes based on metric trends and stakeholder feedback.

Glossary of Terms and Definitions

Benchmark Job: A role with robust market data used to calibrate pay ranges.
Budget Envelope: Total planned spend for a compensation program or cycle.
CHRO: Chief Human Resources Officer, the executive policy sponsor for Total Rewards.
Compa-Ratio: Base pay divided by range midpoint; used to assess position in range.
Compression: Small or no pay differences between employees of different tenure or capability, often due to market shifts.
Geo Differential: Adjustment reflecting labor market costs across locations.
Lump Sum: One-time payment not added to base salary.
Market Reference Point: The market percentile (e.g., P50) used to anchor pay.
Midpoint: The central value of a pay range.
Range Maximum/Minimum: The upper/lower bounds of a pay range.
Range Spread: (Max − Min) ÷ Midpoint; indicates the width of the range.
Red-Circled: Pay held constant because it exceeds range maximum.
Talent Scarcity Premium: Additional pay positioning for hard-to-fill or critical skill roles.

Communication to Employees and Managers

The following narrative is intended for employees and managers to explain our approach to base pay in clear, accessible language.

At <Company Name>, we aim to pay fairly, competitively, and consistently. Your base salary is part of a broader Total Rewards package that recognizes the value you bring, the responsibilities of your role, and the markets where we compete for talent. We use external market data and an internal job framework to create pay ranges for each level. These ranges have a minimum, a midpoint, and a maximum. Most employees progress toward the midpoint as they grow skills and contribute over time.

Each year, typically in <Month>, we review our salary ranges and consider market changes, company performance, and budget. Managers then make merit recommendations based on your performance and where your current pay sits in the range. If your pay is lower in the range, you may be eligible for a larger percentage increase than someone already near the top of the range. This helps us maintain both competitiveness and equity. If you are at or above the range maximum, we may use a one-time payment instead of adding to base pay, where permitted by local law.

When you change roles, pay changes follow clear guidelines:

Promotions usually come with an increase that moves your pay into the new range, reflecting higher responsibilities.
Lateral moves may or may not change base pay, depending on scope and market factors.
If a role change results in a lower grade, your pay will be aligned with the new range, following local laws and careful review by HR.

For new hires, we consider market data, your experience, and the pay of team members in similar roles. This ensures offers are competitive externally and fair internally. In some cases, we use sign-on bonuses to address one-time needs without creating long-term inequities in base pay.

We are committed to equal pay for equal work. We routinely review pay patterns for fairness across comparable roles and locations, and we take action if we find inconsistencies. If you have questions about your pay or believe an adjustment may be appropriate, talk with your manager or HR Business Partner. They can explain how your pay fits within the range and what growth may look like over time.

Here is what you can expect during the annual cycle:

You and your manager will complete performance reviews by <Date>.
Managers will make recommendations within company guidelines and budgets.
HR will review for fairness and completeness.
Approved changes will appear in your paycheck effective <Date>, and your manager will communicate the details to you.

We strive to be transparent about how pay decisions are made. While specific salary data are confidential, we will share range information and the factors that influence decisions. If your role is eligible for different pay based on work location, we will explain how location tiers and differentials are applied.

Thank you for your contributions to <Company Name>. Your skills and dedication are essential to our success. If you have questions at any time, please reach out to your manager or HR Business Partner, or visit <Intranet Site> for more information about our compensation programs.

Document Information:

Document Type: Salary Administration Policy
Category: Base Compensation
Generated: August 24, 2025
Status: Sample Template
Next Review: <Insert Review Date>

Usage Instructions:

Replace all text in angle brackets < > with your company-specific information
Review all sections for applicability to your organization
Customize content to reflect your company's policies and local regulations
Have legal and HR leadership review before implementation
Update document header with your company's version control information
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.