How to Establish Salary Ranges

Simply put, salary ranges dictate the lowest and highest salary a company is willing to pay for a particular position. They are commonly featured on job advertisements, and ranges can differ widely.

Employers primarily use salary ranges when writing job advertisements, but ranges are sometimes discussed during interviews. The discussion typically occurs when it’s relevant to the prospective candidate. Sometimes, an employer may ask the employee their desired salary range, and negotiations will proceed.

Any suggested salary range needs investigation before being offered or accepted. This research is generally done through comparison to similar roles and working out an average.

Online salary calculators can be helpful for this purpose, as they automatically compare roles and provide the numbers for you.

Simply put, they provide both applicants and employers with a specific framework to negotiate pay over.

Without numbers, both parties will go into the interview blind, and some applicants may just pass up the opportunity entirely for fear of being underpaid. There are multiple reasons why salary ranges are so important, but let’s take a closer look at some specific examples.

Provides employers with flexibility

You could inadvertently drive the perfect candidate away if you only offer a single salary amount when advertising for a new position.

If the number you provide is too low, they may not even bother applying. The flexibility of a salary range accounts for higher goals and implies the possibility of career progression.

Ensures employees are paid what they deserve

As an employer, you will hire people from all backgrounds and skill levels. Incorporating salary ranges into your business means you can give the highest qualified or most experienced staff members the highest pay.
That value of experience can be highly motivating, as staff will have a tangible goal to work towards when improving their performance.

Allow companies to budget more effectively

Managing a company’s finances is no small undertaking, so the more specific you can be, the better. Having salary ranges for each department allows you to better estimate labor costs and prepare for future projects.
Knowing with some certainty how much a new employee may cost is invaluable knowledge.

Increases applicant competitiveness

If you have done the proper market research and offer a higher salary range than competitors hiring for a similar role, you’ll catch prospective applicants’ attention.

Not only that, but they will be more enthusiastic through the hiring process as it sends the message that you value what they do. This respect is particularly crucial for younger generations.

All job seekers are looking for it

Lastly, and arguably most importantly, job seekers want to see it. A job advertisement with no indication of salary is a huge red flag.

It looks unprofessional and gives the applicant no insight into how you value their work. It can also give the impression that you haven’t done the necessary market research. Don’t be surprised if an applicant passes you by entirely because you haven’t stated a salary range.

So, now you are converted to the importance of having salary ranges for all your positions, it’s time to discuss how you can establish them. There are various specific criteria you need to consider before making a final decision.

Luckily, we’ve broken it down into several easy steps.

Let’s get into it:

Accurately identify what the job role entails

First things first, you need to know the details of the job you’re offering entails.

Management roles will always require larger salaries due to the heightened responsibility. Take into account everything you will expect from a staff member fulfilling this role. Those expectations should give you the basis to build your salary ranges.

Compare similar job roles already out there

Once you have identified everything the staff member will be doing in their role (or at least have an estimate), you should look to the market to see what other companies are offering. It doesn’t have to be for the same role, as that can be difficult to find.

Instead, look out for roles that carry the same responsibility. This will give you a good reference point for whether you are undervaluing your staff.

Determine your standing in the market

As we mentioned before, salary ranges are great ways to attract the attention of applicants. However, to be truly successful, you should always try to edge out your competition.

The highest salary ranges will always attract the most attention. You shouldn’t over-extend your budget, but try to make the role as attractive as possible. Even just a couple of thousand can make a significant difference.

Include pay raise margins

You don’t need to post these on job advertisements, though stating that there is an opportunity for growth is always advisable. Staff like to know that they can progress through your company, but you should budget this from the start; otherwise, you may run the risk of creating salary ranges that are simply too large.

Keep the minimum and maximum of your salary ranges within a few thousand of each other. Any upper limits beyond the max can be factored in as room for promotion.

Keep an eye on the market

The business world is constantly changing, so it makes sense that job roles do too. These changes mean salary ranges that were once appropriate may have changed.

Make sure that you keep up with these changes; otherwise, another company may just recruit all the best applicants before you even get a look.

Don’t lose out on acquiring the best possible talent — keep your eye on the market.