{"id":128078,"date":"2022-11-16T09:12:44","date_gmt":"2022-11-16T09:12:44","guid":{"rendered":"https:\/\/www.aihr.com\/?post_type=hr-glossary&#038;p=128078"},"modified":"2024-11-07T16:21:44","modified_gmt":"2024-11-07T16:21:44","slug":"range-spread","status":"publish","type":"hr-glossary","link":"https:\/\/www.aihr.com\/hr-glossary\/range-spread\/","title":{"rendered":"Range Spread"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\" id=\"h-what-is-range-spread-in-hr\">What is range spread in HR?<\/h2>\n\n\n\n<p>A range spread is the range of pay established by employers to compensate employees for performing their job. It includes a minimum, maximum, and mid-range pay rate. For example, the range for a particular position can have a minimum of $45,000 and a maximum of $60,000:&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Minimum<\/strong><\/td><td><strong>Range midpoint<\/strong><\/td><td><strong>Maximum<\/strong><\/td><\/tr><tr><td>$45,000<\/td><td>$52,500<\/td><td>$60,000<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>A salary range spread is established through understanding market pay rates and external benchmarking. A range spread is useful for multiple reasons:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Job postings:<\/strong> Many jobs require a salary range spread to be posted, so it is useful to have this information on hand.&nbsp;<\/li>\n\n\n\n<li><strong>Setting targets:<\/strong> You can create compensation targets and adjust along the way to ensure there is an appropriate spread of pay across the company.&nbsp;<\/li>\n\n\n\n<li><strong>Establishing <a href=\"https:\/\/www.aihr.com\/blog\/pay-equity\/\">pay equity<\/a>:<\/strong> You\u2019re able to compare spreads across different departments and roles and understand the state of internal pay equity.<\/li>\n\n\n\n<li><strong>Clear communication:<\/strong> Employees can be shown the salary range and where they fall within the range, making communication around salary clear and transparent.&nbsp;<\/li>\n\n\n\n<li><strong>Plan salary increases:<\/strong> Companies are better able to understand salary increases and promotions if a clear range spread is present. For example, if an employee is already at the maximum of a range when it comes to annual increases, an employer has to make a decision on if a significant increase is needed or not (particularly when compared to employees at the minimum point).<\/li>\n<\/ul>\n\n\n\n<p>Here is what salary range spread fits in the context of <a href=\"https:\/\/www.aihr.com\/blog\/how-to-create-salary-ranges\/\">creating salary ranges<\/a>:<\/p>\n\n\n\n<figure class=\"wp-block-image size-full pin-image\"><a href=\"https:\/\/www.aihr.com\/wp-content\/uploads\/Salary-Range-Spread.png\" target=\"_blank\" rel=\"noreferrer noopener\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"680\" src=\"https:\/\/www.aihr.com\/wp-content\/uploads\/Salary-Range-Spread.png\" alt=\"Salary Range Spread\" class=\"wp-image-128090\" srcset=\"https:\/\/www.aihr.com\/wp-content\/uploads\/Salary-Range-Spread.png 1024w, https:\/\/www.aihr.com\/wp-content\/uploads\/Salary-Range-Spread-300x199.png 300w, https:\/\/www.aihr.com\/wp-content\/uploads\/Salary-Range-Spread-768x510.png 768w, https:\/\/www.aihr.com\/wp-content\/uploads\/Salary-Range-Spread-510x339.png 510w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-do-you-calculate-the-salary-range-spread\">How do you calculate the salary range spread?<\/h2>\n\n\n\n<p>Depending on the data you have access to, you can calculate range spread in a couple of different ways:<\/p>\n\n\n\n<p><strong>1. Use the minimum pay and maximum pay data.<\/strong> The formula is:<\/p>\n\n\n\n<p class=\"has-text-align-center\"><em>(Maximum pay &#8211; Minimum pay) \/ Minimum pay = Range spread<\/em><\/p>\n\n\n\n<p>In other words, if the maximum is $50,000 and the minimum is $30,000, your range spread from the minimum to the maximum number would be:\u00a0<\/p>\n\n\n\n<p class=\"has-text-align-center\"><em>($50,000 &#8211; $30,000) \/ $30,000&nbsp; = 66%.<\/em><\/p>\n\n\n\n<p><strong>2. Use midpoints. <\/strong>If you know the midpoint as well as the minimum and maximum, you can do the following:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>To calculate the spread above the range midpoint: <em>(Maximum pay &#8211; Midpoint pay) \/ Midpoint pay<\/em><\/li>\n\n\n\n<li>To calculate the spread below the range midpoint: <em>(Minimum pay &#8211; Midpoint pay) \/ Midpoint pay.<\/em><\/li>\n<\/ul>\n\n\n<div class=\"gutenberg-quote-columns one_column\">\n\t<div class=\"gutenberg-quote-column\">\n\t\t      \n\t\t     \t\t\t\t\t     <div class=\"gutenberg-quote-column-content\"><div class=\"flex-shrink-0 flex flex-col relative items-end\">\n<div class=\"pt-0\">\n<div class=\"gizmo-bot-avatar flex h-8 w-8 items-center justify-center overflow-hidden rounded-full\">\n<h3 class=\"relative p-1 rounded-sm flex items-center justify-center bg-token-main-surface-primary text-token-text-primary h-8 w-8\"><strong>Optimize salary range spreads to strengthen pay equity<\/strong><\/h3>\n<p>Clear salary range spreads support transparent pay practices and help set fair compensation levels across roles.<\/p>\n<p>In AIHR\u2019s <a href=\"https:\/\/www.aihr.com\/courses\/compensation-benefits-certification\/?il_id=ctr&amp;il_name=box-and-link-in-article&amp;il_position=none\" target=\"_blank\" rel=\"noopener\">Compensation &amp; Benefits Certificate Program<\/a>, you\u2019ll learn to design competitive and balanced pay ranges using market data and best practices.<\/p>\n<p>This self-paced, online program will help you establish clear range spreads, set compensation targets, and foster fair pay practices across your organization.<\/p>\n<div style=\"text-align: center;\">\n<div class=\"wp-block-button has-custom-font-size has-medium-font-size\"><a class=\"wp-block-button__link has-white-color has-text-color has-background has-link-color wp-element-button\" style=\"border-radius: 5px; background-color: #30206b; padding: 15px 30px; font-size: 18px;\" href=\"https:\/\/www.aihr.com\/courses\/compensation-benefits-certification\/?il_id=ctr&amp;il_name=box-and-button-in-article&amp;il_position=none\" target=\"_blank\" rel=\"noopener\">GET STARTED<\/a><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n              \n\t<\/div>\n\t \n<\/div>\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-affects-the-range-spread-at-your-organization\">What affects the range spread at your organization?<\/h2>\n\n\n\n<p>Some of the factors that could affect your range spread include:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The use of <a href=\"https:\/\/www.aihr.com\/hr-glossary\/broadbanding\/\">broadbanding<\/a>, which is a compensation approach that consolidates a range of similar job classifications into one pay band.<\/li>\n\n\n\n<li>The tenure of an employee. Many times employees that have long tenure are outliers when placed on a salary spread due to historical increases.<\/li>\n\n\n\n<li>The number of positions within the company.&nbsp;<\/li>\n\n\n\n<li>The complexity of roles; some roles and departments have a wider variety of roles and levels, and the spread might vary more.&nbsp;<\/li>\n\n\n\n<li>The pay grade structure in the company.<\/li>\n\n\n\n<li>The maturity of a company\u2019s job architecture. If there are clear guidelines around job families, levels, and grading, understanding your range spread becomes easier.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-a-good-range-spread\">What is a good range spread?<\/h2>\n\n\n\n<p>A good salary range spread is typically anywhere between 30% to 40%. However, this is heavily dependent on the job, job level, and the industry. Findings by the <a href=\"https:\/\/www.erieri.com\/blog\/post\/common-compensation-terms-formulas\" target=\"_blank\" rel=\"noreferrer noopener\">Economic Research Institute<\/a> use the following spreads for these job levels:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Administration\/Operations: 40% +<\/li>\n\n\n\n<li>Professional\/Management: 50% +<\/li>\n\n\n\n<li>Executives: 50-65% +<\/li>\n<\/ul>\n\n\n<div class=\"gaihrpl gaihrpl-29\"><div class=\"gaihrpl-single aaihrpl-147\"><a class=\"gofollow\" data-track=\"MTQ3LDI5LDYwMA==\" href=\"https:\/\/www.aihr.com\/courses\/compensation-benefits-certification\/?il_id=banner&#038;il_name=cbcp&#038;il_creative=cbcp-modules&#038;il_position=slot2\" target=\"_blank\" rel=\"nofollow\" style=\"display:block;padding-top:20px;\"><img decoding=\"async\" src=\"https:\/\/www.aihr.com\/wp-content\/plugs\/podcast-blog-ads-fade.jpg\" srcset=\"https:\/\/www.aihr.com\/wp-content\/uploads\/CBCP-Banner-Modules.png 360w, https:\/\/www.aihr.com\/wp-content\/uploads\/CBCP-Banner-Modules.png 360w, https:\/\/www.aihr.com\/wp-content\/uploads\/CBCP-Banner-Modules.png 700w, https:\/\/www.aihr.com\/wp-content\/plugs\/ w\" sizes=\"(max-width: 480px) 360px, (max-width: 960px) 360px, (max-width: 1280px) 700px, 750px\" style=\"box-shadow: 0px 0px 20px 5px rgb(46 61 73 \/ 15%);display: block;margin: auto; border-radius:19px;\" class=\"small_ad\" \/><\/a>\r\n<br><\/div><\/div>","protected":false},"parent":0,"menu_order":0,"template":"","hr_glossary_category":[575],"class_list":["post-128078","hr-glossary","type-hr-glossary","status-publish","hentry","hr_glossary_category-compensation-benefits","description-off"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.4 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>What is Range Spread in Compensation? 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