Article
14 min read
How to Create Salary Bands for Transparent Compensation Plans
Global HR

Author
Lorelei Trisca
Published
January 31, 2025
Last Update
January 31, 2025

Table of Contents
Step 1: Conduct a job analysis
Step 2: Gather market data
Step 3: Define your pay philosophy
Step 4: Group jobs into job families and levels
Step 5: Establish salary ranges for each band
Step 6: Align salary bands with internal equity
Step 7: Communicate and implement the salary bands
Step 8: Monitor and maintain
Common challenges when defining salary bands and how to overcome them
Tools and resources for creating salary bands
Manage compensation and payroll with Deel
Key takeaways
- Salary bands are a range of pay rates that determine the minimum and maximum amount an employee can earn for a specific job or position within an organization.
- Companies typically base these bands on factors such as job title, level of responsibility, years of experience, and industry benchmarks.
- Creating salary bands can ensure fairness and consistency in pay, attract and retain top talent, and provide a clear structure for career advancement.
Navigating the complexities of compensation is no small task, especially when transparency and fairness hang in the balance. Conversations about pay are often shrouded in secrecy, leading to discrepancies that can erode trust and undermine morale. As organizations face the challenge of retaining top talent and fostering equity, creating structured salary bands becomes an essential strategy.
At Deel, we’ve seen how well-constructed salary bands can transform compensation plans—from ensuring pay aligns with market benchmarks to supporting clear paths for career progression.
This guide will walk you through eight actionable steps to establish salary bands that balance internal fairness with external competitiveness.
Step 1: Conduct a job analysis
Before we start looking at numbers, the first step in creating salary bands is conducting a comprehensive job analysis. This job analysis aims to outline the key responsibilities, skills, and qualifications for every role in your org chart so you can make informed decisions about fair compensation. At the end of this step, you should have:
- Detailed job descriptions: Comprehensive and updated for each role, outlining responsibilities, required skills, qualifications, and expected outcomes
- Job levels: A clear hierarchy of roles (e.g., entry-level, mid-level, senior) that reflects organizational structure
- Employee insights: A better understanding of how employees perceive their roles and contributions
To gain this information:
Interview employees and managers
Set up interviews and/or questionnaires to engage directly with employees and their managers and gather insights about each role. Ask questions such as:
- What are the primary responsibilities of your role?
- What skills, tools, or certifications are essential to perform your job?
- What challenges do you face, and how do you address them?
- What does success look like in your position?
This qualitative data helps you understand day-to-day operations, nuances of the job, and any additional contributions employees make beyond their core duties.
Review existing job descriptions
Ideally, each of your current roles will already have a job description linked to it. Audit these to identify gaps or outdated information, then adjust as required to reflect the current expectations of the role. Focus on:
- Clearly defined job titles and levels; for example, the difference between a marketing coordinator and a junior marketing associate
- Key deliverables, responsibilities, and qualifications
- Any overlap or inconsistencies between roles
Conduct a workload analysis
Examine the scope of work for each role to ensure their duties are balanced appropriately across the team and are neither underutilized nor overburdened. Consulting work diaries or logs capture details of how each employee spends their time.
Read more
For a more comprehensive overview of this process, check out our guide to conducting a job analysis in nine steps, including how to overcome any common challenges.
Step 2: Gather market data
Collecting marketing compensation data will help you zoom out and understand how your rates of pay compare to similar organizations. Acting on this knowledge can position your company as an employer of choice and entice or retain top talent in your field. Here are two ways to gather market data:
Use a benchmarking service
A third-party benchmarking provider is often the quickest way to gain accurate industry figures. These allow you to compare your aggregated, anonymous salary details with market data sets, making it easy to query compensation based on roles, levels, regions, and more.
Conduct independent analysis
If you don’t want to pay for a salary benchmarking service, the alternative is to gather market data through independent research. Although this is more time and resource-intensive, you can still yield some valuable insights if you commit to this process methodically by:
- Using public data: Review salary reports from trusted organizations like LinkedIn, Glassdoor, or Indeed
- Reviewing job ads: Collect data from job ads for similar roles in your region and industry. Pay attention to listed salaries, experience requirements, and additional benefits
- Survey employees in similar roles: Conduct anonymous surveys or use LinkedIn polls or similar to gather information about current compensation practices within your network
Global Hiring Toolkit
Step 3: Define your pay philosophy
Only one company can offer the highest compensation in the market, and if it isn’t yours, that’s okay. Instead, you should focus on creating a pay philosophy that aligns with your company’s values and goals. This will serve as the foundation for your salary bands and guide your compensation decisions.
Numerous decisions will go into your philosophy, including:
- Market positioning: Do you aim to be competitive within the market or above/below average? What is realistic for your company?
- Internal equity: Will you base salaries solely on job responsibilities, or will other factors like tenure, performance, or skills also be considered?
- Transparency: Will you share compensation information either publicly or internally within your organization? Will you follow the example of companies like Buffer, which publish first names, roles, and locations alongside compensation?
- Budget constraints: What is your overall compensation budget? How much financial flexibility do you have to move to a higher percentile?
- Geographic differences: If you’re developing a compensation strategy for global teams, will you incorporate local market rates into your pay to reflect the cost of living differences?
- Bonuses: Will you offer employees bonuses based on performance, company targets, or individual contributions? If so, what percentage of their base salary will this match?
Example of a compensation philosophy
Contract automation platform Juro offers a highly detailed pay framework that includes information about:
- The company’s goals for compensation—to improve clarity, retention, and recruitment
- Its guiding principles—to be competitive, sustainable, accessible, and global
- The framework’s building blocks, including compensation and calculation elements
- Its compensation review process
Step 4: Group jobs into job families and levels
Based on the information you collected during your job analysis in step one, group every role in your org chart into different job families and job levels. This involves clustering job titles that share similar responsibilities, competencies, and career paths. Some examples of job families include:
- Marketing and communications
- Sales
- Finance and accounting
- Operations
Next, assign each role to a specific level within their respective family—for example, entry-level, mid-level, senior, etc. Depending on the size of your organization, you might choose to have a few job levels or many.
A job-leveling framework helps you standardize roles and clearly define career progression within your company, which can be important for both employee retention and hiring.
Pay attention to:
- How many levels and job bands you need based on your company size—for example, three, five, seven, etc.
- How broad each level should be
- Which roles belong to which levels
- How promotions and career progression will work in line with moving from one level or salary band to the next
- How you will account for any overlaps between roles
- How your different job families compare to each other—for example, will you offer higher pay for the sales job family than the accounts family based on their revenue-building potential?
Complementary guide
Learn more about how to create a job-leveling matrix to support this process.

Step 5: Establish salary ranges for each band
While step four creates the skeleton of your compensation structure, the next step is to flesh it out with specific details for each salary band and level. Here’s how to build out your band, using an example of a Customer Success Manager (CSM) belonging to the Customer Success job family for illustration.
Define your salary band range
Create the following points:
- Minimum salary: The starting point for employees who meet the basic requirements of the role. For example, $60,000 per year
- Midpoint salary: The median for employees with solid experience and consistent performance. For example, $75,000 per year
- Maximum salary: The cap for employees who exceed expectations and demonstrate exceptional results. For example, $90,000 per year
Calculate the spread
Use the following formula to calculate the spread between the minimum and maximum of each band.
- Spread percentage = Maximum salary minus minimum salary / minimum salary x 100
- Example = Maximum salary = $90,000 minus minimum salary of $60,000 / $60,000 x 100
- The spread total for the CSM band would be 50%
Adjust for regional and market variations
Consider geographic differences based on market data. For example:
- The salary band for a CSM based in New York City might have a pay range of $75,000 to $105,000 due to the higher costs of living there
- Conversely, the salary band for a CSM based in Oklahoma might have a pay range of $50,000 to $80,000
Checkly, a company offering an uptime monitoring tool, has an interesting approach to adjusting pay based on location. It uses a compensation strategy around London as a benchmarking base and then applies four location factors. Checkly uses Numbeo as its cost-of-living and rent indexing tool.
- If the capital city’s cost of living is <70% of London, Checkly will pay 0.9x the benchmarking rate. Examples include Argentina, Spain, Ukraine, Poland, Serbia, and Italy
- If the capital city’s cost of living is between 70% and 120% of London, Checkly will pay 1x the benchmarking rate. Examples include the UK, Germany, Japan, Netherlands, Belgium, Sweden, France, and Ireland
- If the capital city’s cost of living is >120% of London (except USA Tier 1 locations), Checkly will pay 1.2x the benchmarking rate. Examples include most of the USA
- If the capital city’s cost of living is equal to USA Tier 1 locations, Checkly will pay 1.5x the benchmarking rate. Examples include New York and Boston
(If relevant) Introduce overlaps between salary levels
To allow for flexibility and career progression, you might include some degree of overlap between bands. For example:
- Junior CSM Band: $50,000 - $70,000
- Mid-level CSM Band: $60,000 - $90,000
- Senior CSM Band: $80,000 - $110,000
This overlap allows junior employees to earn an increase without needing immediate promotion. It also allows high-performing mid-level employees to approach the senior band before formally advancing.
Take care with overlaps, though, as they can muddy the waters in a transparent compensation practice. It’s hard to justify why you’re paying two employees so differently for the same role if you can’t demonstrate where one outperforms the other.
Use data-driven tools
To keep you aligned with market rates and your fair compensation practices, lean on third-party consultants or tools to cross-check current data.
Step 6: Align salary bands with internal equity
Squeezing your employees’ current compensation into your new framework is a delicate process and one you should take your time on.
Create a mockup of your salary bands
Begin by creating a mockup of where each employee should be placed based on their job evaluation results. Although this isn’t set in stone, it provides a visual representation of where each of your current compensation choices lies and a useful starting point for discussion.
Compare salary ranges with current employee pay to identify discrepancies
The first step is to identify discrepancies between the proposed salary bands and current compensation. While many employees may fall naturally into the new structure, others will present challenges:
Overpaid employees
Example: A long-term employee in a junior role earning above their band maximum due to their 20-year tenure. Possible approaches include:
- Grandfathering pay: Maintain their current salary, but cap further increases until the band catches up. Admittedly, this may take several years.
- Role adjustment: Redefine their responsibilities or elevate them to a more senior level to justify their pay.
- Transparent communication: Explain why their pay is above the range and how future changes will align with the new structure.
Underpaid employees
Identify employees whose current salaries fall below the band minimum. Address this by offering:
- Immediate adjustments: Bring salaries to the minimum level as quickly as your budget allows.
- Phased increases: Incrementally raise pay over a defined period to minimize financial strain.
Solicit feedback from managers and leadership
Engage managers and leadership by asking them to review and validate where employees’ salaries lie within the new framework. While you can’t be certain employees will agree with their managers, they are well-placed to understand the alignment between the role and the suggested compensation level.
This process should involve:
- Opening up conversations with department heads and senior leadership
- Incorporating manager insights to evaluate how a worker’s performance or responsibilities align with their proposed salary band.
- Making any necessary adjustments based on their feedback
Step 7: Communicate and implement the salary bands
Once you’re happy with your version of the compensation structure, share it with your employees. While most workers will rush to look at the numbers, be sure to accompany the salary details with:
- The rationale or philosophy behind your framework
- The fair process you followed
- The benefits of the new framework
- A point of contact where employees can direct any inquiries or concerns; for example, an HR representative, line manager, or senior leader
- A list of frequently asked questions you anticipate or materials to answer them
- Clear documentation on how employees can increase their salary; for example, achieving a job promotion that would move them into a new salary band, annual benchmarking organically increasing a salary band’s compensation, taking on new responsibilities, or learning new skills to move up the levels within a band
Supplement the list above with documentation for managers, explaining how they should use the salary bands for hiring, promotions, and salary adjustments. All managers must follow the same process to maintain equity throughout your organization.
Step 8: Monitor and maintain
Salary bands aren’t a set-it-and-forget-it exercise. Market compensation averages will naturally increase, but the roles within your organization will also evolve in some of the following ways:
- The scope of a role may change to include new responsibilities
- Other roles are phased out completely
- New roles are created, which must be added to your job families or prompt you to create a new job family entirely
- Job families or levels may become too granular, convoluted, or underrepresented
Maintain the integrity of your framework by conducting regular reviews and making updates as necessary. Aim for bi-annual check-ins of your market rates and annual check-ins of your job classifications to ensure everything is still accurate.
By continuously monitoring and adjusting your salary bands, you can ensure fairness, transparency, and alignment with market standards in your organization’s compensation practices.

Common challenges when defining salary bands and how to overcome them
Building salary bands is far from a cookie-cutter process. Some common challenges crop up as you plan and implement your framework. Here’s how to overcome them:
1. Balancing market data with budget constraints
Suppose your company is struggling to offer competitive pay. In that case, you may need to be creative in how else you motivate and engage your employees. While you may offer less than the 50th percentile in the market, consider offering flexible work arrangements or generous employee benefits to attract and retain talent alongside base pay.
Continue consulting benchmarking data to check you’re maintaining consistency in the market. For example, if your current salaries are at the 25th percentile of the market value, try to continue along the same trajectory rather than letting your compensation dip to the 10th percentile.
2. Addressing pay inequities
When new pay bands are implemented, it’s likely that inequities will be uncovered. This can include discrepancies between employees performing the same role, as well as gender or racial pay gaps.
The first step in addressing pay inequities is to understand what your compliance responsibilities are. Depending on your location, you may be subject to various pay transparency laws or pay directives.
Next, conduct a thorough analysis of your pay practices to identify any potential discrepancies. If issues are found, work with HR and legal teams to develop an action plan for correcting these issues and ensuring fair pay in the future.
3. Avoiding salary negotiations
Some employees will wish to challenge your framework and negotiate. But while you may welcome some feedback in the early stages of launching your compensation framework, particularly from a managerial perspective, it’s important to establish clear guidelines about negotiation.
In most cases, entering into salary discussions isn’t a good idea in companies that have introduced a pay structure to achieve fair pay. After all, the ability to negotiate compensation does not indicate someone’s skill to perform their role. And you don’t want to end up paying someone extra for negotiating well when the most important skill in their role is software development.
Set firm boundaries about salary reviews, including the types of situations you wouldn’t award extra pay for, such as falling on tough times or having a child.
4. Clarifying your band boundaries
The point at which one salary band meets the next is your boundary, and it can be a gray area if you haven’t defined it properly. How will you know where one band ends and the next begins? The job evaluations you carried out in step one are key here, providing a natural hierarchy for different roles and seniority levels.
An extract from “Armstrong’s Handbook of Human Resource Management Practice” advises,
“A distinct gap between the highest rated job in one grade and the lowest rated job in the grade above will help to justify the allocation of jobs between grades. It will, therefore, reduce boundary problems leading to dissatisfaction with gradings when the distinction is less well defined.”
Tools and resources for creating salary bands
Building effective salary bands requires reliable tools and resources to keep your compensation competitive, equitable, and aligned with organizational goals. Here are some essentials:
- Salary benchmarking platforms: Tools like Deel Salary Insights, Mercer, Radford, and Payscale provide market data to benchmark compensation by role, level, and location.
- HR software: Platforms like Deel Engage and Deel HRIS assist in designing, implementing, and managing pay structures, ensuring alignment with internal equity, employee development, and market rates.
- Compensation consultants: Experts from firms like Willis Towers Watson offer tailored insights and strategic guidance for crafting competitive pay frameworks.
- Industry reports and free data: Reports from SHRM, Glassdoor, and LinkedIn Salary Insights offer additional data for benchmarking and location-based adjustments.
Manage compensation and payroll with Deel
Creating salary bands is a powerful way to build trust, transparency, and fairness within your organization. With Deel’s comprehensive suite of tools, you can create salary bands that are competitive, equitable, and seamlessly integrated into your global workforce strategy:
- Deel Compensation: Build structured, transparent compensation plans with insights from aggregated market data. Integrated with Deel’s payroll and performance tools, this compensation feature streamlines pay equity, salary band creation, and decision-making—all in one platform.
- Deel Engage: Foster a high-performing workforce with tools for career development, manager training, and employee engagement, and enforce pay-for-performance models where you link performance scores to specific salary bands. Our platform uses AI-powered insights to build career frameworks, performance reviews, and development plans that support employee growth.
- Deel’s built-in HRIS: Manage the entire worker lifecycle compliantly in 150 countries and process pay globally using our global payroll solution
Consolidate HR tasks, automate compliance with local labor laws, and track employee data with ease using Deel’s unified platform. Ready to provide compensation clarity in your organization? Book a free Deel demo today.
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About the author
Lorelei Trisca is a content marketing manager passionate about everything AI and the future of work. She is always on the hunt for the latest HR trends, fresh statistics, and academic and real-life best practices. She aims to spread the word about creating better employee experiences and helping others grow in their careers.