A methodical approach to assigning a monetary value to employees in return for work performed. Compensation may include any or all of the following: base pay, overtime pay, commissions, stock option plans, merit pay, profit sharing, bonuses, housing allowance, vacations and all benefits. This is referred to as remuneration in some foreign countries.
It is common to see salary range midpoint progressions (the percent difference between midpoints) within a salary structure as follows:
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% +
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 a 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 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 more definitions and formulas
The updated and expanded Common Compensation Terms & Formulas white paper includes definitions and formulas for the following terms: