Some organisations have one salary per grade. In this case, when a job is assigned a grade, the salary is easy to identify. However, many organisations have a salary range for each grade, so it is necessary to identify a particular salary for each job within that salary range. When an organisation sets its salary levels it is helpful to understand what similar organizations are paying their staff for similar roles.
The process for setting a salary structure is shown in the diagram below:
When identifying salaries, take the following issues into account:
Local labour legislation and employment practice such as employment tax, minimum wage and social security. Where possible, gain advice from a local employment lawyer or consultant.
Local common practice on salaries, allowances and other benefits. This includes researching other organisations (based locally if possible) involved in similar work. Where there are no local organisations, collect information from a nearby town or main city and adjust the data according to the local cost of living. To identify common practice, it is best to contact at least eight similar organisations. It is recommended that a human resources specialist visits other organisations as it can sometimes be difficult to compare jobs between organisations. Organisations use different job titles, and duties carried out by similar roles may not be identical. It is therefore helpful to gather organisational charts and job profiles from other organisations and understand how each organisation calculates its salaries, in order to decide whether it is a fair and consistent method.
Location of the job. If the job is based away from the main office, it may be necessary to carry out separate research for this location. However, the time needed to do this can only be justified if the cost of living is substantially different from the main office.
Budget available to pay salaries. In principle, salary levels should not be driven by available funding. Instead, salaries should reflect the salaries paid by similar organisations to their staff. However, sometimes funds are limited, which may have an impact on salary levels. Since analysis of salary data can be difficult and take a lot of time, it is advisable to seek help from a member of staff with financial expertise or a local professional consultant. A local salary survey carried out by another organisation could also be useful. However, check that the survey data is accurate and meets the organisation’s requirements.
Here we provide some ideas for analysing salary data and setting salaries:Draw a table in which to put salary data collected from other organisations. Use only data from organisations with similar roles, and with fair and consistent salaries. Each row in the table represents a job that is being compared across organisations. The columns represent different organisations.
Once the salaries have been inserted, calculate an average across the organisations for the same job. It is suggested that the highest and lowest figures in each row are excluded from the calculation. To find the average, add up all the remaining salaries for each job and divide the sum by the number of salaries included in the calculation.
Use these calculated averages for each job as a starting point for setting the salary. Decide how the organisation wants to compare itself with these other organisations. It may want to pay salaries above or below the average.
The salaries should follow the same pattern as the grades. In the example grading structure above, salaries should be higher in the A grades than the B grades.When a job cannot be compared with jobs in other organisations, the grades can act as a guide as the example on page 19 shows. Using this system means that salaries are calculated in a simple way and line managers are not paid huge salaries compared with those they line manage. However, it is possible that jobs on the same grade may not always be paid the same salary. For example, an officer working on a medical project may need medical qualifications and therefore be given a higher salary than an officer working on a community development project.
Once a set of salary levels has been identified, consider the overall costs in relation to available funds. If necessary, repeat the process until an acceptable solution has been achieved.
Other salary issues
Informing staff about salaries: s taff should be informed of their salary, and any change in salary, by letter, and the grade should be set out in the employment contract. Payment of salary: payment should be made directly to the member of staff. Where payment is in cash, both the organisation and the member of staff should keep a signed payslip as proof of receipt. Tax and social security payments should be deducted from a staff member’s salary where this is a legal requirement.
Salary reviews: Individual salary levels should be reviewed each year to take account of increases in the cost of living and local conditions or customs. Cost-of-living information could be obtained from an employment consultant or government department. It is wise to collect fresh salary data from other organisations every two to three years to ensure the organisation’s salaries are competitive.
