Pay Banding

From the Ask Tom mailbag:

Question:
Yesterday, you talked about compensation and referred to pay bands. I think I know about pay banding, so how does that relate to Levels of Work?

Response:
Levels of Work, as described by Elliott Jaques in Requisite Organization, provides a logical framework for pay banding. Here’s the framework.

Stratum V roles (Longest Time Span tasks ranging from 5 years to 10 years)
Stratum IV roles (Longest Time Span tasks ranging from 2 years to 5 years)
Stratum III roles (Longest Time Span tasks ranging from 1 year to 2 years)
Stratum II roles (Longest Time Span tasks ranging from 3 months to 1 year)
Stratum I roles (Longest Time Span tasks ranging from 1 day to 3 months)

Pay Banding, as a concept, slices each Stratum range into six segments (or eight segments, or four segments, but I like six). Entry level pay in each Stratum role would define starting pay for that Level of Work. Six segments up the Time Span range in that Stratum would define the highest pay for that Level of Work.

Pay banding provides a structure to design predictable Fair Compensation inside each Stratum, leaving the Team Member’s Manager and Manager-Once-Removed (MOR) discretionary latitude to make compensation decisions inside defined guidelines.

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