Broadbanding is a job grading structure that falls between using spot salaries vs. many job grades to determine what to pay particular positions and incumbents within those positions. While broadbanding gives the organization using it some broad job classifications, it does not have as many distinct job grades as traditional salary structures do. Thus, broadbanding reduces the emphasis on ‘status’ or hierarchy and places more of an emphasis on lateral job movement within the company. In a broadbanding structure an employee can be more easily rewarded for lateral movement or skills development, whereas in traditional multiple grade salary structures pay progression happens primarily via job promotion. In this way, broadbanding is a more flexible pay system. This flexibility, however, can lead to internal pay relativity problems as there is not as much control over salary progression as there would be within a traditional multi-level grading job (structure).
When an employee has clearly better skills, management may want to pay a considerably larger amount than is indicated by the market rate for that person’s job description. This approach tends to reduce the pressure for someone to be promoted, since broadbanding allows a person to be paid more without a promotion.
Advantages of broadbanding
Broadbanding offers many benefits to your business, your managers and your employees. It provides more opportunities for those within your company to make important decisions about their roles and compensation. Some of the most important advantages of broadbanding include:
It encourages your employees to grow
Managers who use broadbanding usually determine their employees’ pay based on the skills they have that can benefit the company. The managers can do this because job level shares similar skills and competencies. When employees learn new skills that allow them to perform more roles within the company, they increase the pay they can earn within their job level. This can help motivate your employees to learn the skills they need to earn a higher salary.
It lets your managers determine their employees’ compensation
Because broadbanding uses wide ranges for potential salaries, it helps empower your managers to give their employees raises. Typically, companies that use broadband pay structures allow their managers to make their own decisions about employee compensation. This is because the broad salary band allows each employee to earn increasingly more pay while remaining in the same position.
It streamlines the chain of command
Since managers in a company that uses broad salary bands often supervise many teams, this can result in a lower number of managers than otherwise. This creates a smaller management team, which can streamline the communication they have with each other. Each manager often has only a few managers above them to help them make important decisions or to whom they report any issues or progress.
Reduces the need for specialized roles
Because broad salary bands motivate employees to have a wide range of skills, it reduces the need for many employees to have narrow skill sets. This allows you to have many employees capable of performing multiple roles depending on your company’s needs. This is helpful when assigning tasks, completing projects and setting company goals.
Values all employees
Employees at companies with broadband structures can continue to earn raises while remaining in their current role. This can help motivate them to continue to perform well without seeking a promotion. Broad salary bands allow you to show your employees how valuable they are to the company, no matter what position they have. Helping your employees feel valued can create a positive work environment, which can help increase morale, employee commitment and productivity.
It makes your business adaptable
Broadbanding allows you to implement new policies and processes with a reduced need for restructuring. Since some of your employees might fill various roles, it reduces the need for creating new ones when implementing change. Instead, you can encourage your employees to learn new skills or trust your managers to know which employees can best accomplish new tasks.
Disadvantages of broadbanding
Broadbanding can have some disadvantages when creating motivation for your team. It’s helpful to take these advantages into consideration when deciding whether a broad band structure works best for your company. Some disadvantages of broadbanding include:
It makes it challenging to compare salaries to market rates
Since many employees have more general roles, it can be challenging to find a market rate for their position. This can make it unclear to your managers and employees when determining how much they might typically earn for the jobs they do. It might be helpful to find an average of other, similar positions common in the job market to determine a typical salary. You might also find it helpful to determine the tasks your employees each perform most often to help both you and them determine what a typical salary might be.
It offers fewer promotions
Because of the reduced job levels, employees have fewer opportunities to earn a promotion. Some employees may view promotions as a motivating factor to perform better. However, you can use their potential for earning higher pay within their role to help continue to motivate them. You might also consider other motivating incentives, such as office parties and prizes for reaching a goal.
Its midpoints are unclear
Because of the general nature of each pay level, it’s sometimes unclear where the salary midpoint should be. To help with this, consider grouping each job level’s skill set around more specific business goals, such as sales goals. This can help you determine an average salary for the roles that might typically accomplish those goals. It’s helpful to base the salary midpoints around these averages. You might also consider figuring out how many roles your average employee might fulfill and how important those roles are to the company to help you determine an average base salary for that job level.