A pay band is sometimes used to define the range (band) of compensation given for certain roles. The range is based on factors like location (high vs low cost of living locations), experience, or seniority.
Pay bands (sometimes also used as a broader term that encompasses several pay levels, ranges or grades) is a part of an organized salary compensation plan, program or system. In an organization that has defined jobs, pay bands are used to distinguish the level of compensation given to certain ranges of jobs to have fewer levels of pay, alternative career tracks other than management, and barriers to hierarchy to motivate unconventional career moves. For example, entry-level positions at a landscaping company might include truck drivers and laborers. Those jobs and those of similar levels of responsibility might all be included in a named or numbered pay band that prescribed a range of pay, (e.g. Band 1 = $10–17 per hour). The next level/classification of a group of similar jobs would include increased responsibility, and thus a higher pay band (e.g. Band 2 = $13–21 per hour).
Organizing pay structures in a pay band manner allows for overall control at the management level of an organization, while still giving some discretion for supervisors to reward good performance, and keeping within a reasonable compensation budget structure.
History
The history of pay bands dates back to the beginning of employment and compensation. The amount of compensation for one's work is a question that many have tried to answer but have come short. The Classification Act of 1923 mandated that pay was based on performance not qualifications, a practice that made sense when the workforce was largely clerical. However, by the 1950s managers were complaining that the system was problematic for reasons of no competition, frustration and non responsive. In April 2000, the United States General Accounting Office authorized Section 9509, which authorized the general workforce classification and pay. In detail, the term "broad-banded pay system" was clearly defined as any system for grouping positions for pay, job evaluation, and other purposes that is different from the system established under chapters 51 and 53 of title 5 as a result of combining grades and related ranges of pay into one or more occupational series.
Other types of pay structures
Traditional structure
Organizations are looking for a pay system for rewarding with compensation and also working well within that organization. In the traditional structure there is a difference between employee and manager with an example of pay according to their position. To get a high pay, there needs to be movement up the hierarchical ladder. Moving up the ladder to a manager position will change the pay range is a traditional pay structure but, "this system fosters competition rather than collaboration."
Pay for performance
Although the Pay-for-Performance System is "widely used" for its "positive effects" on employee production, findings of negative side effects like "dysfunctional competition" have left employers wondering if this plan should be adopted. Their reasoning in keeping this system in place is related to the need for "fair managerial control", a battle many managers are striving to win.
Broadbanding structure
Broadbanding uses the General Schedule that places families of occupations together. For example, Office Services, General Support, Analysis, Law Enforcement, Sciences, Health, etc. Movement to a different level is based on full-performance, expertise, or years of working in this position. This structure is used to classify work requirements rather than positions to get a higher pay.
Process of changing a pay band
There are two ways an employee's pay band can be changed. If the job description correlates with the national profile for said job then their transition will go relatively smoothly. However, for more complex or newer jobs that do not have a national profile, their process becomes increasingly difficult. In some cases employees are required to fill out large amounts of paperwork and go to a formal job evaluation panel to discuss their positions responsibilities. This also means that once an employee goes through the process and gets placed in a new pay band, others in similar positions will likely be grouped together in the same pay band.