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What HR Needs to Teach Managers About Salary Ranges

bethanye McKinney Blount
Aug 3, 2022 6:00:00 AM

There’s a lot of competition for talent and compensation is growing quickly as a result. Wages and salaries have increased 5% over the last year in the United States and are projected to increase another 4.1% in 2023. Organizations may need to update their salary bands in order to accommodate this wage growth.

At the same time, pay transparency laws are changing the culture around salary ranges. For example, the California Equal Pay Act requires that companies share the salary range for a role with a candidate upon reasonable request. Colorado’s Equal Pay for Equal Work Act goes a step further to require that salary ranges be shared within job postings. As it stands, 29% of job openings in the United States disclose salary information. 

It’s becoming more common for your team members to understand the salary range for their role and similar positions elsewhere, driving questions around why they earn what they do. Answering these questions is crucial for employee retention, as compensation is the most common reason people leave their jobs.

It's going to fall to HR to sort out this tangle and make sure everyone has the information they need—including managers who are going to be on the front lines answering questions from their direct reports.

Start with the basics

It's important to educate your managers and make sure they have access to the information that they need.

Titles vs. levels vs. bands

How does your company think about titles? Are they meaningful throughout the company? I’ve worked in companies where job titles were important and significant. I’ve also worked in companies where they were whimsical and didn’t say much about the job or seniority. Whether a title “matters” comes down almost wholly to company culture. In some roles, a title must also signal job responsibilities and seniority to non-employees, like customers.

How do levels associate with those titles, if at all? It’s not mandatory for titles to have a direct association to a job level, and in some companies there’s no connection. In most companies, it’s common for titles to provide a direct reflection of the job level. This means that if you know someone’s title (say, a Senior Engineer) then you also know their Level (say, T4). While most companies work this way, some do not. When titles reflect levels, it is the same as having all levels be public inside the company. Depending on company culture, you may resist broadcasting employee levels—but that’s a post for later!

How do ranges associate with those levels? Once you know an employee level, what is the salary range for that level? How does that range relate to the ranges above and below it? Understanding how ranges relate to each other helps managers think about employee promotions. As I said here, I’m a fan of overlapping ranges because they let managers give raises without requiring a promo.

Where can a manager find this information for their employees? You probably won’t opt to share every salary band for every level with every manager. Instead, you’ll need to be ready to share salary bands for managers that make sense for their work and employees. Managers can be more successful if they have range data for all the levels represented by their employees—plus one level above, so they can plan for promotions.

Range penetration and compa-ratios

How can managers use compa-ratios? As much as I love compa-ratios, in fairness I haven’t found that they make much sense to an individual manager. Compa-ratios are a great way to see how your organization is trending vs. ranges. Managers often have far smaller groups to consider, and the big picture isn’t as meaningful to them.

How can managers use range penetration? Now range penetration (also known as position-in-range)that seems to make more sense to individual managers. This shows where in the range your employee is, and it’s easy to see when they are above or below range. This explanation is both logical and easy for managers to visualize. For the compensation professionals, both compa-ratios and range penetration can be useful. But when working with internal customers, I find the latter seems easier for “regular managers” to grasp.

Where can managers find this information for their employees? Most managers prefer that ratios and ranges come to them pre-calculated. Though labor-intensive, a spreadsheet is the common tool to share this information.

Did I mention that Compaas makes this part way easier? Our platform helps managers understand how total compensation works, visualize pay range penetration, and communicate about compensation with their team members.

Company compensation principles

Photo by Clem Onojeghuo on Unsplash

How does the company balance cash vs. stock in employee compensation? An earlier-stage company may choose to pay much more stock and lower cash to reduce burn. Later-stage companies often pay higher cash and less total stock to employees.

How are we targeting compared to the market? Most companies use more than one source to determine their salary bands. Once you kind of know what the market is doing, you still have to decide where you want to sit. These targets are usually represented as percentages. For example, “We want to hit 60% of market salaries.” Especially for competitive roles, managers will be keen to understand how the company tracks against market data.

How transparent should I be with my employees about this? Give managers specific language to use. If the company is using more cash than stock for compensation, make sure managers know how to say that. If the company doesn’t want to share details of how they create salary bands, be clear on that point.

Total Rewards: Compensation is more than cash

Compensation has many different components. These include salary/wages, bonus, stock, and other benefits (healthcare, perks, commuter, etc.). Managers need to understand what falls into Total Rewards, and how to talk about them. Giving all employees a Total Rewards statement helps managers navigate these conversations.

When asked for advice…

Employees are going to ask managers for advice. I know this one from decades of personal experience. Compensation, especially when you include stock, can be confusing. Help your managers out by giving them specific language to use in common scenarios. For example, when asked about exercising options: “You should talk to a tax advisor before making a decision.”

Teach managers about the resources the company provides, too! If your company has existing docs, make sure your managers know how to find and share them. “It’s on the wiki” isn’t the right answer, but it’s often what people end up hearing.

Other things that can come up

Sometimes, an employee reports to the manager who created their salary offer—but that’s not always the case. The responsibility may fall to recruiting or to a more senior manager. Even when hiring managers create offers, managers may inherit people and teams they didn’t hire and won’t know how their current pay came to be. You’ll need to prepare them for the compensation questions they’ll face.

For managers who support very senior people, they will also need to process having someone work “for them” who makes more than they do. I see this as a rite of passage for all developing managers. Still, not everyone handles these realizations with grace. A bit of research can help predict who will need extra support as they learn more about compensation.

Think through your team’s process for how you’ll share all this information with managers. You’ll want a process that is consistent, secure, and not burdensome for you or your team.

There is a lot of work involved in communicating compensation. Luckily, Compaas makes it easy to keep your data accurate, up to date, and understandable.


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