ERI Economic Research Institute is pleased to provide an expanded and updated glossary of commonly used compensation terms and formulas for your ongoing reference, effective January 1, 2023. The following is a sample of terms and formulas related to the topic of Salary Range, with an index of the complete reference provided below. Visit ERI to learn more about common compensation terms and stay updated on new and emerging HR terms and definitions.
Salary Range
A salary range represents the minimum, midpoint, and maximum rates that a business is willing to pay employees performing a job. Typically, the midpoint or control point is set to provide market competitive, fair, and equitable salaries based on the competitive marketplace for a business. Salary ranges can be determined using compensation software such as ERI’s Salary Assessor.
Salary Range (Employee Placement)
Salary Range Midpoint Progression
It is common to see salary range midpoint progressions (the percent difference between midpoints) within a salary structure as follows:
Administrative/Operative: 5-10%
Professional/Management: 10-15%
Executive: 15-20%
Salary Range Spread
It is common to see salary range spreads (the percent difference between the minimum and maximum) within a salary structure as follows:
Administrative/Operative: 40% +
Professional/Management: 50%+
Executives: 50-65% +
Salary Range Minimum and Maximum Formula
To calculate the salary range minimum and maximum from the salary range spread and midpoint (assumes a 75,000 midpoint and a 50% range spread):
Salary Range Overlap
To calculate the salary range overlap:
Here are three examples of salary range overlap:
In the first example, a 0% overlap will not work unless it is a step structure.
In the second example, a 50-60% overlap is moderate. This should be the goal of a typical salary structure.
The last example shows substantial overlap. This would occur if there are too many salary grades or too little difference in market rates between salary grades. Pay equity issues may occur when a substantial range overlap occurs.
Salary Range Penetration
Salary Range Spread
To calculate the salary range spread from the maximum and minimum of a salary range:
To calculate the salary range spread from a minimum percent and maximum percent:
Salary Range Spread on Either Side of Midpoint
To calculate the salary range spread from the minimum to midpoint and the midpoint to maximum:
The updated and expanded Common Compensation Terms & Formulas whitepaper includes definitions and formulas for the following terms:
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