Advantages of Pay Ranges Over Specific Pay Levels

Advantages of Pay Ranges Over Specific Pay Levels

A pay range is a part of an organized compensation system whereby remuneration is determined by the educational and empirical requirements for a particular job. It entails the lowest and the highest payment levels for a particular job, and a worker’s definite pay falls within the range. Pay ranges categorize job functions into compensation grades where every position’s remuneration is based on its contribution to the organization’s revenue.

One of the advantages of pay ranges over specific pay levels is flexibility. An organization can compensate a little more or less depending on the level of education, experience, as well as performance. A firm can also offer slightly more money to acquire an employee with a higher qualification or reduce labor expenditures by employing one with less experience (Milkovich, Newman & Milkovich, 2002).

A pay range offers organizations a system of compensating workers consistently for the tasks they perform in a particular rank. Workers in a similar kind of job understand that they are paid somewhat identical to coworkers, which reduces internal fights and anger. Also, employees earning less in organizations with specific pay levels are likely to feel despised, hence the importance of the pay range (Heneman & Wener, 2000).

Pay range enables a firm to budget effectively for labor costs by examining the number of jobs at every pay grade and establishing a realistic estimate of total labor expenditures by a job, department, as well as organization. Managers can evaluate current labor in relation to demand and forecast impending needs for particular jobs (Heneman & Wener, 2000).

The range pay also allows firms to compare with rival companies, instead of examining pay that is modified to every single job or worker. A firm whose pay range is below its rivals can raise the lowest and highest pay to appeal to talent (Milkovich, Newman & Milkovich, 2002).

Conversely, pay ranges limit the flexibility of leaders regarding salary decisions. Moreover, much time and resources are required to establish and manage pay ranges on a continuous basis.

In summary, a pay range assists organizations to manage their labor cost and retain the best talent, which enhance productivity. For many companies, the advantages of formal pay ranges outweigh the disadvantages.






Heneman, R., & Wener, J. M. (2000). Merit Pay Linking Pay to Performance in a Changing World. Charlotte: Information Age Publishing.,+rather+than+specific+pay+levels,+for+each+job.&hl=en&sa=X&ved=0ahUKEwjb0eOt-83YAhUH7xQKHRltDTUQ6AEIJzAA#v=onepage&q=the%20advantages%20of%20establishing%20pay%20ranges%2C%20rather%20than%20specific%20pay%20levels%2C%20for%20each%20job.&f=false

Milkovich, G. T., Newman, J. M., & Milkovich, C. (2002). Compensation (Vol. 8). New York: McGraw-Hill.