Job Levels 101

5 min read
May 10, 2023 6:05:00 AM

Job levels and pay bands are the building blocks of a strong compensation strategy. Together, they can help ensure pay equity, improve recruiting and retention efforts, and help you build a more transparent company culture. They should both be considered early in an organization’s life cycle, but pay bands will inevitably change with the market while job levels should be built to scale so they remain fairly consistent.

It’s important to establish your job levels early to prevent equal pay and career growth problems before they start. Here’s what you need to know:

What are job levels?

Job levels, also known as job grades and classifications, set the responsibility level and expectations for roles at your organization. They may be further defined by impact, seniority, knowledge, skills, or job title, and are often associated with a pay band. The way you structure your job levels should be dictated by the needs of your unique organization and teams.

The simplest way to structure job levels is to bucket roles for each job family into three categories: entry-level, mid-level, and senior-level. This model doesn’t allow for much career progression between levels, and people may stall in the mid-level — causing them to leave.

Some organizations expand this out by structuring career levels by job title and work experience:

  • 1: Entry-level individual contributor; requires less than three years of relevant experience
  • 2: Experienced individual contributor; requires 3-5 years of relevant experience
  • 3: Senior individual contributor and managers; requires 5-7 years of relevant experience
  • 4: Directors; requires 8-10 years of relevant experience
  • 5: Vice Presidents and General Managers; requires more than 10 years of relevant professional experience

This may work well if employees in your organization tend to follow a linear career path to climb the corporate ladder. However, it isn’t the ideal structure for teams with highly skilled individual contributors who have no desire to move into management roles, such as some technical talent.

For this reason, some organizations focus more on impact than on years of work experience. For example, technical roles may fall into the following job levels:

  • T1: Entry-level; learning technical and professional skills
  • T2: Early career, with basic skills developed; work contributes to the success of the team goals
  • T3: Seasoned professional, with a variety of technical skills developed; strong problem solver; key for success of the team goals
  • T4: Advanced; very senior; can solve most problems or issues that arise; uses experience to forward company goals
  • T5: Exceptional; considered an expert within the company (and sometimes externally as well); drives timeline, features, and development through broad influence
  • T6: Luminary; central to the company’s success; translates organizational strategic goals into team plans; provides fundamental contributions to long-term company planning in their area of expertise

In this model, a staff, principal, or senior software engineer may be classified as T4, T5, or T6, depending upon their level of impact to the organization, and could very well be in a job level (and corresponding salary band) above their manager.

Why job levels matter

Job levels help you make more strategic and consistent decisions around how you hire, engage, promote, retain, and sometimes even dismiss talent.

  • Align on role responsibility and impact: Never begin your recruitment process without a clear understanding of the role’s ideal job level and corresponding expectations, qualifications, and impact. You can’t find and evaluate the ideal candidate if you haven’t defined who they are. Job levels also help you identify talent gaps in your teams, so you have the right mix of people to help you reach your organizational goals.
  • Close top-choice candidates: Lack of career progression is a top reason for employee turnover. Job levels demonstrate your commitment to career growth and illustrate what it will take for employees to advance to the next level.
  • Develop stronger salary bands: You can better determine salary bands for each job level when you’re clear on the level’s corresponding expectations and impact. Salary bands enable you to make consistent compensation decisions that attract and retain talent.
  • Improve pay equity: Well-defined job levels help you place people at the right level, with the right salary band, to improve pay equity. They also work to define when an employee is ready to move to the next career level, so promotion and compensation increase decisions are more consistent and fair.
  • Engage and retain your talent: A career path helps each employee envision a future at your organization, and career progression demonstrates to your employees that you value them. This can help you engage and retain your workforce, as employees won’t need to look for a job opportunity elsewhere in order to grow professionally.
  • Hold yourself accountable: Job levels defined with role responsibility and impact help you make important decisions around promotions and involuntary separations. They also help you commit to rewarding employees who are under-leveled, and letting go of employees who are underperforming where they’re slotted.

What to look for when planning, reviewing, and approving job levels

There are often many stakeholders involved in planning, reviewing, and approving job levels — from compensation specialists and Human Resources generalists to department heads and company executives. Each should be familiar with some best practices to ensure everyone's aligned.

  • Job descriptions: Differentiate the roles that fall under each job classification by thinking through the job responsibilities, expectations, and impact of each. If a given role can fall under different levels, explicitly state what is expected under each level to differentiate them. Documenting job descriptions will provide transparency around how job levels came about, and clearly demonstrate what it will take to advance to the next level.
  • A focus on impact: It’s not uncommon for a less experienced employee to make a bigger impact than a more seasoned employee. Make sure you retain top performers by awarding a job level and corresponding salary band that accurately reflects their impact rather than their years of experience. Similarly, a productive software developer shouldn’t get stuck in a low job level because they have no desire to be promoted into management. Make room for these individual contributors in a top job level so they can be recognized for their contributions and continue to see compensation growth that reflects their impact.
  • Room to grow: Your organization may not need many job levels now, as you may only have a handful of people in each job family. But as your company grows, more job levels can help differentiate between levels of responsibility and impact. Planning for those additional job levels before you need them can help you make better decisions when the time comes to scale across all departments.
  • A communication plan: The best time to build job levels was before you started hiring. The next best time is now. If you’ve already begun building out your team, you'll need a plan to address any changes you need to make and a plan to communicate those changes with your team. For example, you may find that some employees are in a higher level than they should be and that you’re overpaying them. Let them know that they’re not eligible for a pay increase until they move to the next level — and tell them what it will take to get there. Or you may find that some employees need to be moved up to the next job level and salary band to reflect their impact. Create a plan for how and when you'll make those adjustments and share that plan with your employee so they know it's coming. Thoughtful communication around compensation can be just as important as the pay itself.

Final thoughts: Job levels lead to better compensation decisions

It’s common for organizations to arbitrarily assign job levels and pay grades — but doing so can cause a lot of problems. Over-inflating titles may leave little room for future hiring plans and lead to inflated compensation. And without a firm compensation strategy in place, decisions are made ad hoc — potentially leading to pay inequities as you continue to grow. Being intentional about job levels and corresponding salary bands can prevent these issues, while making it easier to attract, engage, and retain talent.

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