Are pay bands necessary (and why)?

Oct 14, 2021
min read

Let’s talk about bands. No, not the shows you’re itching to see since live music came back – and not stacks of $1000 either (though you aren’t far off). Pay bands. 

Pay bands can be an essential part of a company’s compensation strategy. They’re used to create consistency in the hiring process, performance management, and career development. They’re also key for planning and communication. 

What are pay bands? 

Pay bands are ranges established by individual organizations for specific roles. In a company that has defined roles, pay bands determine the value each role has, based on market value and internal value, and provide opportunities for more effective pay management.

If you aren’t yet utilizing this strategy, here are five reasons why you should consider pay bands at your company.

Five reasons to consider pay ranges

1. Maintain consistency

A pay range gives your company a system to pay your people consistently for the work they do in their given position. This takes a load off HR and establishes a mutual understanding of pay and performance expectations across the company.

Candidate offers also become easier to create with this structure, as compensation is already decided upon when postings go up, and hiring managers are equipped to answer questions regarding pay.  

2. Attract and retain talent 

Companies have a better chance of attracting and retaining top talent with pay bands, all while providing current employees with a clearer understanding of promotion paths and expectations. 

It allows for managers and employees to work toward milestones when evaluating performance, and talent knows early on how much they can grow at your company and what they have to do to get there. Especially in roles where there is opportunity for employees to work as an individual contributor versus a people manager, pay bands allow your company to carve out paths to drive career growth and job satisfaction.

3. Pay transparency

By using a stepped system, employees have a solid understanding of pay differences between themselves and employees in similar roles. 

Hiring managers and department heads are also prepared to communicate pay ranges with candidates and employees, allowing them to understand right away how determined pay can help them to set and achieve their goals. 

4. Equity, equity, equity

Statistics Canada found that in 2018, women workers earned 87 cents for every dollar earned by men, and the gap is only wider for racialized and intersecting identities. 

The implementation of pay bands is beneficial for calculating compensation metrics that highlight under-compensated and over-compensated employees, so you can address pay inequality and inequity at your company.

5. Gain a competitive edge

The best candidates are usually selective about the positions they’re applying for, so being upfront and honest about a position’s compensation and expectations can give you a competitive advantage. 

A set structure for career growth paths and opportunities will give your people something to work for, and ensures there’s a place for them to flourish in whatever path they choose. 

Don't risk falling behind 

While it’s possible your company may not see the implementation of pay bands as a priority right now (or at all), there are a few drawbacks to playing the waiting game. 

Pay inequity

The most pressing issue is pay inequity. Without a set structure and company-wide understanding of pay and career growth expectations, you risk paying your people unfairly, contributing to Canada’s persistent wage gap and causing your people to seek work elsewhere.

Lose the talent war

Lack of transparency can mean you’re merely falling behind in the talent war, allowing companies with pay bands to stay one step ahead. Less structure for hiring managers means spending more time getting postings up and preparing for interviews – time that could be spent hiring the right people. 

A little structure doesn’t hurt. It could make all the difference in employee happiness and retention, building a stronger team, and simply doing the right thing.  

Learn more with Humi

Dive into more Humi content about pay:

Learn how you can pay your people on time, every time with Humi.

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