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Number of pay grades
There are many grades, or levels, within a salary structure. They represent relative job value. The number of grades used by an organization will vary.
Not surprisingly, the number of grades is associated with the size and number of levels within the organization. It also seems reasonable that organizations with a fluid, organic structure would have a minimum of grades, whereas more structured organizations would have more grades.
The usual number. There's no optimum number of pay grades for a salary structure. In practice, the number of grades varies from as few as 4 to as many as 40. But in practice, 12 would suffice for a small company and 14-18 would be an appropriate number for a company with up to 5,000 employees.
How many? A number of considerations help to determine the appropriate number of grades:
- Organization size. Typically, the larger the organization, the more grades.
- Comprehensiveness of job structure. A structure that covers the whole organization will tend to have more grades than one that only includes exempt, nonexempt, or a single job cluster.
- Type of jobs in a structure. Generally, salary structures for exempt jobs will have more grades than salary structures for only nonexempt jobs.