Employers use job analysis to identify key features of the different positions they have, and what skills employees need to successfully fill these positions. Companies use this data to create salary ranges for employees when they look to hire new workers. Sometimes they offer workers a wage, but for other positions, especially positions in management, they offer candidates a salary, a set amount of money for the year.
A salary range is the range of compensation a company is willing to pay an employee for a certain position. This range has a high point and a low point. For instance, a salary range for an entry-level position may be between $28,000 and $36,000 per year. The worker may end up with a starting salary anywhere between these two numbers, based qualifications, on how much he asks for and what the company is willing to negotiate.
Internal vs. External Ranges
There is a difference between a general salary range and a specific hiring range. The general salary range is the range that workers are paid for a particular position in the industry. It is the going rate for that position on the market. The hiring range is the range that a company is actually considering paying for the position, and is influenced by company budget and other factors. The hiring range is almost always lower than the general salary range. Most hiring ranges are only the bottom third of the greater hiring range, especially when economies are experiencing a retraction.
The primary advantage of a hiring range for a company is flexibility. The business does not have to promise a specific salary for a position. Instead, it can match the salary to the skills and experience of the person it hires, in combination with the availability of funds, which may unexpectedly change. Companies can also use the general salary range to their advantage. By looking at what the entire industry range is, companies can see what their competitors are offering employees and make sure their terms are as generous or better to attract the best workers. If companies cannot increase their hiring range, they may be able to offer additional benefits instead.
Uses by Employees
For employees and employee candidates, information is power. If a candidate knows both what the salary range and hiring range is for a particular position, that candidate is in a much stronger negotiation position than someone who knows neither. The candidate understands what the company is willing to accept and can more easily name a figure that will win them the position. Employees already working for the company can use these ranges to ask for raises.