Job grades or levels are a part of a broad system of pay commonly known as a salary schedule or pay schedule. Organizations that use job grade levels to associate pay with particular levels of education, experience and skills typically do so to maintain equity in compensation and to avoid potential discrimination.
Salary.com describes two common types of pay structures used by most organizations--internal equity and market pricing. Market pricing is a system that simply means paying what is necessary to get the best candidate for a job. The federal government and many other organizations use systematic internal equity methods of pay to adhere to increased emphasis on equitable pay and nondiscrimination in the early 21st century.
When organizations establish a salary schedule and requisite pay grades, they have to consider payroll budgets and their ability to handle incremental pay increases as employees earn more qualifications for higher pay. Pay schedules are typically set so that employees performing similar work or jobs with similar education and work experience earn the same pay. Conventional salary grade schedules often have a minimum, medium and advanced pay level for each job grade. This helps make certain that employees with more education and experience earn more than colleagues on a similar job grade.
Federal government agencies utilize a well-established pay schedule called the General Schedule, or GS. The GS assigns pay grades for entry-level positions in every job from levels 1 to 15. A GS-1 placement is for entry-level workers with no high school diploma, according to the Federal Consumer Information Center (FCIC). Additional education of high school and beyond leads to higher placement. Depending on the agency, a bachelor's degree earner starts at GS-5 or GS-7. Higher placements include master's degrees, legal degrees and doctoral degrees.
Some employees prefer an opportunity to sell their experience in a more free-enterprise scenario. However, pay schedules with predefined salary grades are effective at helping prevent intentional or unintentional discrimination in pay between employees. Fair pay for a particular job helps prevent perceived bias and low morale among workers. Benchmarking jobs with expected skill levels and pay also helps employees know what goals to establish to move up in pay grade.