Sample Salary Structure Design Maintenance 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.

Document Header

Document Title: Salary Structure Design & Maintenance Policy

Document Type: Salary Structure Design & Maintenance Policy

Category: Base Compensation

Company: <Company Name>

Version: <Version Number>

Effective Date: <Date>

Last Reviewed: <Date>

Next Scheduled Review: <Date>

Document Owner: <Title or Function (e.g., Head of Total Rewards)>

Document Sponsor: <Executive Sponsor (e.g., CHRO)>

Approvers: <Approver 1 Title>; <Approver 2 Title>; <Compensation Committee, if applicable>

Confidentiality: Internal Use Only

Field	Value
Business Unit Coverage	<Global / Region / Business Unit Name>
Employee Groups Covered	Salaried Exempt; Salaried Non-Exempt; Hourly; <Union / Non-Union>
Geographies	<Country>; <Country>; <Region>
Systems of Record	<HRIS Name>; <Comp Planning Tool>; <Payroll System>
Related Policies	Job Architecture Policy; Pay Transparency Guidelines; Promotion and Transfer Policy; Sales Compensation Policy

Purpose and Objectives

This policy sets the standards and governance for designing, implementing, and maintaining salary structures at <Company Name>. It ensures pay practices are market-competitive, internally equitable, compliant with applicable laws, and financially responsible.

Objectives:

Establish a consistent methodology for market pricing roles and translating market data into salary structures
Define clear rules for salary range construction, progression, and maintenance
Provide guidance for geographic pay differentiation and global currency practices
Outline governance, roles, and responsibilities to maintain documented controls and audit readiness
Support talent strategies by enabling fair, transparent, and sustainable pay decisions
Mitigate legal, pay equity, and operational risks related to base compensation

Scope and Applicability

In Scope

All salaried and hourly base pay structures for <Company Name> permanent employees
Global and local salary structures, including region or country-specific ranges
Separate structures for executives, sales, hourly, technical career paths, and specialized roles
Geographic differentials, cost-of-labor zones, and remote work location practices
Salary structure maintenance, including annual structure movements and off-cycle adjustments
Pay range use for hires, promotions, demotions, and transfers
HRIS configuration standards related to grades, bands, ranges, and exchange rates

Out of Scope

Variable compensation (short-term incentives, sales incentives, long-term incentives) except where salary ranges interface with target incentive administration
Contingent workers, interns, or apprenticeships unless explicitly defined in a separate appendix
Collective bargaining agreements where pay structures are determined by union contracts
Country-specific statutory pay elements governed by law or regulation when they conflict with this global policy

Applicability

Applies to all covered entities and affiliates of <Company Name> unless superseded by local law or approved local policy
In the event of a conflict between this policy and local law, local law prevails; the policy should be adapted to maintain compliance

Guiding Principles

Market competitiveness: Target market position aligned to talent strategy (e.g., P50, P60, P75) using reputable surveys
Internal equity: Comparable roles have comparable pay opportunities, balancing job size, skills, and impact
Pay for the role: Base pay ranges reflect the job’s scope and market value, not the incumbent’s personal characteristics
Simplicity and usability: Structures are transparent to HR and managers and easy to administer in systems
Fiscal stewardship: Structures align with budget realities and support long-term affordability
Compliance and ethics: Adhere to applicable pay equity, minimum wage, working time, and pay transparency laws
Data-driven: Decisions are supported by valid market data, clearly documented assumptions, and auditable methods
Consistency with flexibility: Maintain global standards with space for local adaptation via defined governance

Key Concepts and Metrics

Salary Grade or Band

A level within a structure representing jobs of similar value and market price

Salary Range

The minimum, midpoint, and maximum defining the pay opportunity for jobs within a grade or band

Compa-Ratio

Actual salary divided by range midpoint; used to assess pay position within the range

Range Penetration

Position of salary between range minimum and maximum; indicates progression through the range

Midpoint Progression

Percentage increase in midpoints from one grade to the next

Range Spread and Half-Range

Range spread is the percent width around the midpoint
Half-range is the symmetric distance from the midpoint to either minimum or maximum
Formula examples:
- Min = Midpoint × (1 − Half-Range%)
- Max = Midpoint × (1 + Half-Range%)
- Range Spread% ≈ 2 × Half-Range%

Salary Structure Design

Job Architecture and Benchmark Coverage

Align structure design with the Job Architecture Policy, including career streams (individual contributor, management, executive) and levels
Define benchmark coverage goals, e.g., at least <Percentage> of employees priced to external survey benchmarks
Use reputable surveys from <Vendor Name>, <Vendor Name>, and industry-specific sources
Map each benchmark job to one or more internal jobs with a clear matching rationale and level alignment
Document non-benchmark jobs and price them by slotting or aging and leveling related benchmarks

Market Positioning and Pay Philosophy

Select target market percentiles by job family, level, and geography
- Core roles: P50 of cost of labor
- Critical/scarce skills: P60–P75
- Early career: P50 with progression opportunities
- Executive roles: Governed by <Compensation Committee> and local regulations
Define how market data are blended:
- Weight by survey relevance, sample size, and scope alignment
- Age data to common date using an annual movement factor of <Percentage> (e.g., 3.0% to 5.0%) with compounding
- Apply currency conversions using <Monthly / Quarterly> planning rates from <Treasury / Finance>

Structure Type Selection

Traditional Grades: Multiple narrow grades with defined ranges; recommended where internal equity and progression clarity are priorities
Broadbands: Fewer, wider bands; suitable in high-change or agile environments; use governance to prevent unmanaged pay inflation
Open-Range vs. Step-Rate:
- Open-range for professional and managerial jobs
- Step-rate or progression grids for hourly and certain regulated roles
Separate Structures:
- Executive salary structure aligned with governance and market norms
- Sales base pay ranges coordinated with sales incentive plans
- Technical dual-career ladders for high-skilled roles

Range Construction Methodology

Anchor grade midpoints to fully aged market data at target percentile
Use consistent midpoint progressions to reflect increasing job size by level
- Typical midpoint progressions:
  - Hourly and entry: 8%–10%
  - Professional: 10%–12%
  - Management: 12%–15%
  - Senior leadership: 15%–20%
Use increasing half-range widths by level to allow greater pay differentiation at higher levels
- Typical half-ranges:
  - Hourly: 15%–20% (30%–40% spread)
  - Professional: 20%–25% (40%–50% spread)
  - Management: 25%–30% (50%–60% spread)
  - Senior leadership: 30%–40% (60%–80% spread)
Round midpoints and range endpoints to sensible values, e.g., nearest <Amount> (such as nearest 100 or 1,000)

Example Structure (Illustrative Only)

Assumptions:

Entry professional midpoint = <Currency>50,000
Midpoint progression = 10% per grade
Half-range increases with level

Grade	Half-Range%	Midpoint	Minimum (Mid × 1 − Half)	Maximum (Mid × 1 + Half)
101	20%	<Currency>50,000	<Currency>40,000	<Currency>60,000
102	20%	<Currency>55,000	<Currency>44,000	<Currency>66,000
103	22%	<Currency>60,500	<Currency>47,190	<Currency>73,810
104	22%	<Currency>66,550	<Currency>51,909	<Currency>81,191
105	25%	<Currency>73,205	<Currency>54,904	<Currency>91,506
106	25%	<Currency>80,525	<Currency>60,394	<Currency>100,656
107	30%	<Currency>88,578	<Currency>62,005	<Currency>115,151
108	30%	<Currency>97,436	<Currency>68,205	<Currency>126,667

Notes:

Values are rounded; exact rounding rules should be documented
Use different structures for hourly or executive roles with appropriate spreads and progressions

Geographic Pay and Remote Work Differentiation

Define location strategy aligned to talent markets:

Single Global Structure with Location Differentials: A geo-neutral midpoint with location index multipliers
- Location Index Example: Base Index 1.00 for <Reference City, Country>
- Satellite City A: Index 0.90; Satellite City B: Index 1.10
- Pay Range Calculation: Local Midpoint = Geo-Neutral Midpoint × Location Index
Multiple Local Structures: Separate ranges by country or metro area where market differences exceed <Percentage> threshold (e.g., 10%)
Remote Work Policy:
- Compensation based on employee’s assigned work location per <Company Name> Remote Work Guidelines
- Changes in work location require HR review and potential range or salary adjustments effective <Date Convention>

Example Location Index Table (Illustrative Only)

Location	Index	Notes
<City A, Country>	1.00	Reference market
<City B, Country>	0.92	Lower cost of labor
<City C, Country>	1.15	Higher cost of labor
<Remote Tier 2>	0.95	Remote tier policy

Pay Progression and Controls

Starting Pay at Hire: Default target compa-ratio for fully qualified hires at 0.95–1.00; adjust for skills and scarcity
Progression within Range: Merit increases aligned to performance and range position; higher increases for lower compa-ratios
Promotions: Minimum promotional increase of <Percentage> to <Percentage> or to new range minimum, whichever is higher
Lateral Moves: No increase unless market adjustment is warranted and approved
Demotions: Adjust pay within the new range based on skills and performance; delay reductions where required by local law
Green-Circle Pay: Salaries below minimum corrected promptly with compliant timing
Red-Circle Pay: Salaries above maximum managed through lump-sum awards or limited increases until range catches up
Compression Management: Monitor gaps between new hire pay and experienced incumbents; use targeted adjustments to protect internal equity

Market Data Selection and Governance

Use at least <Number> reputable surveys per major job family
Prefer cost-of-labor data over cost-of-living indexes for base pay
Age all data to a common effective date using an annual structure movement of <Percentage> (e.g., 3.5%)
Blend data using weights based on survey relevance and sample size; document all weights and assumptions
Maintain audit files including survey cuts, matches, leveling notes, and calculations for <Number> years

Currency and Exchange Practices

Price jobs in local currency then convert to corporate reporting currency using <Treasury> planning rates set <Monthly / Quarterly>
For budgeting, use a constant planning rate to isolate FX noise; for payroll, use actual local currency ranges
Round local currency ranges to reasonable increments (e.g., <Amount> for monthly pay)
For high-inflation markets, consider indexation or more frequent structure refreshes with Finance approval

Legal and Compliance Considerations

Adhere to minimum wage, equal pay, pay transparency, and working time laws in all jurisdictions
For U.S.: consider FLSA exemption criteria when mapping jobs to structures; use salary thresholds where required by law
For <Country>: apply statutory collective agreements, if any, and ensure ranges meet statutory minima
Include pay equity reviews by <Legal / DEI>, especially when implementing new ranges or large adjustments
This policy does not create a contract of employment and may be modified at <Company Name>’s discretion consistent with law

Salary Structure Maintenance

Annual Structure Refresh

Gather aged market data for all benchmarks as of <Date>
Review market movement by country, job family, and level; propose structure movement factors
Model midpoint and range endpoint changes using approved midpoint progressions and half-range widths
Estimate cost impact on merit budget, green-circle corrections, and red-circle management
Validate legal compliance (minimum wage changes, statutory increases, collective agreements)
Review findings with Finance and HR leadership; adjust as needed for affordability and talent priorities
Obtain approvals per Approval Matrix; lock effective dates and communication plan
Update HRIS configuration and test impacts in compensation planning tools
Implement on or before <Date> and monitor for defects or issues

Typical annual structure movement guidance:

Mature markets: 3%–4.5% structure increases
High-growth or hot-skills segments: 4%–7% structure increases
High-inflation markets: consider mid-year refresh or indexation with Finance approval

Off-Cycle Adjustments

Triggers for targeted adjustments outside the annual cycle:

Material market changes exceeding <Percentage> (e.g., 8%) in critical job families
Regulatory changes affecting minimum pay or salary thresholds
Mergers and acquisitions requiring harmonization
New geographies or remote work policy changes
Data corrections or survey re-benchmarking that materially affect ranges

Governance:

Total Rewards drafts a business case with data, cost, and risk analysis
Finance reviews funding implications
Legal reviews compliance and risk
CHRO or Compensation Committee approves per thresholds

Data Quality, Audit, and Documentation

Maintain version-controlled range files showing min/mid/max by grade, country, and effective date
Retain survey data, matching notes, and calculations for <Number> years
Run quarterly audits of compa-ratio distributions, green-circle instances, and out-of-range pay
Enforce maker-checker controls for any HRIS range updates with documented approvals

HRIS Configuration Standards

Store grades, ranges, and effective dates in the system of record; prohibit manual overrides without approval
Enforce range validation on hires and job changes with configurable tolerances
Maintain location fields and location indices for geo-differentiation
Integrate range data to compensation planning tools with nightly feeds
Keep a change log with user, timestamp, old/new values, and approval references

Budgeting and Costing Alignment

Align structure movement with merit budget assumptions
Estimate and include green-circle corrections and pay equity adjustments in annual budget
Quantify the cost of compression relief for impacted teams
Present budget scenarios with low/base/high market movement and associated risks

Exceptions and Approvals

Approval Matrix (examples)

Deviations from range minimum or maximum: HRBP and Total Rewards approval; Finance required if cost exceeds <Amount>
Off-cycle structure changes: CHRO approval; Compensation Committee if executive impact
Promotions exceeding <Percentage> increase: HRBP and Total Rewards; VP approval above <Percentage>

Roles and Responsibilities

Role	Key Responsibilities
Total Rewards	Design structures; analyze market data; set methodology; maintain HRIS ranges; conduct audits; advise HR and leadership
HR Business Partners	Advise managers; ensure compliance with ranges; submit exception requests; support change management and communications
People Managers	Make pay decisions within policy; maintain internal equity; comply with approval workflows; communicate with employees
Finance	Validate affordability; set FX planning rates; partner on budget scenarios; co-approve significant changes
Legal / Compliance	Review legal risks; advise on transparency and equal pay; maintain compliant recordkeeping
HRIS / IT	Configure grades and ranges; maintain data integrity; manage access controls and audit logs
Executive Leadership / Compensation Committee	Approve philosophy, market positioning, and major structure changes; oversee executive structures
Internal Audit	Periodic controls testing; review documentation and approvals; report findings

Implementation Guidelines

Initial Design or Re-Design

Confirm compensation philosophy, including market targets by job family and geography
Establish job architecture clarity and level descriptors
Select survey sources, define blends, and complete benchmark matching
Price benchmarks, age to common date, and map to internal jobs
Determine structure type (grades, bands) and set midpoint progressions and half-range widths
Build preliminary ranges; conduct impact and cost analysis
Validate with HRBPs and selected business leaders; test for internal equity and compression risks
Secure approvals; configure HRIS; prepare training and communication materials
Launch with effective date and monitor adoption

Slotting and Job Mapping Rules

Slot jobs based on market price and internal leveling; avoid title inflation
For non-benchmarked roles, use related benchmarks and leveling factors (scope, complexity, impact)
Document rationale for each slotting decision; maintain mapping files

Pay Decision Guidelines

Hiring managers target starting pay between 0.90–1.00 compa-ratio for fully qualified hires
Early-career or developing hires may start at 0.85–0.95 with growth plans
Pay above midpoint reserved for sustained high performance and deep expertise
Promotions move pay to at least new range minimum or provide <Percentage> increase; consider total compensation competitiveness

Equity and Risk Controls

Conduct pre- and post-cycle pay equity analyses using approved methodology
Ensure consistent decisions across comparable roles and demographics
Require written justification for exceptions with HRBP and Total Rewards review
Implement a cooling-off period for repeated exceptions

Review and Approval Process

Annual Review led by Total Rewards with input from HR, Finance, Legal, and business leaders
Approval Thresholds defined in the Approval Matrix and embedded in HRIS workflows
Version Control maintained with unique version numbers and effective dates
Record Retention of structure files, approvals, and communications for <Number> years or per local law
Change Classifications
- Minor: rounding, non-material corrections; approved by Total Rewards
- Major: market movement, methodology changes; approved by CHRO and, if applicable, Compensation Committee
Audit Readiness quarterly controls testing and remediation actions logged

Metrics and Reporting

Core monitoring and analytics:

Market competitiveness: percent of employees within target compa-ratio bands (e.g., 0.90–1.10)
Internal equity: variance analysis by job, level, gender, and other protected characteristics per law
Green-circle and red-circle counts and remediation timelines
Range penetration distributions by tenure and performance
Compression indicators: new hire versus incumbent pay differentials
Budget adherence: spend versus plan for merit, market, and equity adjustments
Turnover and hiring metrics by pay position and critical skills
Geographic pay alignment versus location indices

Cadence:

Quarterly dashboards to HR and Finance
Annual Board or Compensation Committee summary for executive roles
Ad-hoc analyses for off-cycle decisions

Legal Disclaimers

This policy does not guarantee employment or specific compensation outcomes
All pay decisions remain subject to budget, performance, and legal constraints
Where local law requires disclosures or specific practices, local policy supplements this global policy and prevails in case of conflict
<Company Name> may amend this policy at any time with appropriate approvals

Glossary of Terms

Aging Factor

Percentage used to adjust market data from survey effective date to a common pricing date

Benchmark Job

A job with a clear market equivalent used to price related roles

Broadband

A wide salary band that consolidates multiple traditional grades

Compa-Ratio

Salary divided by midpoint (e.g., 1.00 means at midpoint)

Cost of Labor

Market rate employers pay for jobs in a specific location

Geo-Neutral Midpoint

A single midpoint used before applying local market indices

Green-Circle

Pay below range minimum

Half-Range

Percent distance from midpoint to min or max

Midpoint Progression

Percent increase of midpoints between consecutive grades

Minimum / Midpoint / Maximum

Range endpoints and central reference for pay decisions

Range Penetration

(Salary − Min) ÷ (Max − Min)

Range Spread

Approx. 2 × Half-Range; width of the range around midpoint

Red-Circle

Pay above range maximum

Salary Grade

Level within a structure grouping jobs of similar value

Slotting

Assigning internal jobs to grades based on market price and leveling

Structure Movement

Annual or periodic adjustment to ranges based on market trends

Target Percentile

Market position policy (e.g., P50, P60) guiding midpoint setting

Sample Calculations

Compa-Ratio

Example: Salary <Currency>66,000; Midpoint <Currency>60,000; Compa-Ratio = 1.10

Range Penetration

Example: Min <Currency>50,000; Max <Currency>70,000; Salary <Currency>60,000
Range Penetration = (60,000 − 50,000) ÷ (70,000 − 50,000) = 50%

Local Midpoint from Geo-Neutral

Example: Geo-Neutral Midpoint <Currency>80,000; Location Index 0.95
Local Midpoint = 80,000 × 0.95 = <Currency>76,000

Communication Section: About Your Salary Ranges

This section is intended for employees and managers and is written in a straightforward, reader-friendly style.

At <Company Name>, your salary range reflects the market value of your role and provides room to grow as your skills and impact increase. Each job is mapped to a salary grade with a minimum, midpoint, and maximum. The midpoint represents the market rate for a fully proficient employee in the role. The minimum and maximum give a reasonable span to recognize developing skills and advanced expertise.

How we set ranges:

We review independent market data from established sources and target a market position that fits our talent strategy. For many roles we target around the market median, while some critical or hard-to-hire roles may target above the median.
We refresh our ranges on a regular cycle, generally each year, to keep up with market changes. In fast-moving or high-inflation markets, we may adjust more frequently.

How your pay is set within the range:

When you join or change roles, we consider your skills, experience, location, and internal equity with peers to determine a starting salary within the range.
Employees early in their development are typically paid closer to the range minimum, with room to grow through performance and skill development.
As you develop mastery and consistently exceed expectations, your pay may progress toward or above the midpoint. Pay at or near the range maximum is reserved for sustained, exceptional proficiency and scope.

What to expect during the annual pay cycle:

Each year, managers make pay decisions as part of our merit process, considering performance, position in range, and the team’s budget. We also check for pay equity and address any pay below the range minimum.
If your salary is above the range maximum, increases may be in the form of a lump sum rather than base pay, unless the range changes bring your salary back within the updated range.

Geographic and remote work considerations:

Pay ranges may differ by location to reflect local market rates. If your work location changes, your range and salary may be reviewed to ensure alignment with the new market.
Our goal is to pay fairly for the market in which you work while maintaining internal equity across teams.

Promotions, lateral moves, and demotions:

A promotion generally includes a base pay increase and a move to a higher salary range. The size of the increase varies based on your experience relative to the new role and market conditions.
A lateral move typically does not include a base pay change unless there is a clear market alignment need.
In the rare case of a demotion, pay is aligned to the new range and handled sensitively and in compliance with local laws.

Your role in pay decisions:

Keep your skills and accomplishments up to date in the systems we use for talent and performance reviews.
Talk with your manager about how your work aligns with our career levels and what skills or results will help you progress within the range.

Where to find more information:

You can review the salary grade for your role and the associated range in <HRIS or Compensation Portal Name>.
For questions, speak with your manager or your HR Business Partner. You can also contact <Compensation or Total Rewards email> for guidance.
In locations with pay transparency requirements, you will find additional information on internal job postings or in local policy documents.

Important note:

This overview explains how we use salary ranges to ensure fairness and market alignment. It does not guarantee any specific pay increase or outcome. Individual pay decisions depend on performance, skills, internal equity, and budget, and must follow our policies and approval processes.

Effective date and changes:

The ranges described here are effective as of <Date>. We review ranges regularly and will communicate any significant changes. If local laws require specific notices or disclosures, we will provide those in line with local requirements.

By understanding how salary ranges work, you can see how your role fits within the broader market and what steps can help you grow your career and compensation at <Company Name>.

Document Information:

Document Type: Salary Structure Design & Maintenance Policy
Category: Base Compensation
Generated: August 22, 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.