8 Types of Pay Progress Structures Employers Use

A company’s salary structure can be a major factor in employee satisfaction and retention. Pay progression is the structure a company uses to increase employee compensation over time. If you want to attract the best employees to your company and improve employee retention, you may want to consider implementing a salary progression structure. In this article, we explain what salary progression is and list the many different types of pay progression.

What is Salary Progression?

Wage progression is a structure that companies use to increase workers’ compensation from time to time. There are several different methods of pay raises, including pay increases based on performance and external factors. Companies often implement salary progression structures to add clarity to the process of offering a salary increase, as the structure can act as a guide. There are many benefits to these structures, including increasing employee satisfaction and retention.

related: A Complete Guide to Competitive Salary

Why is salary increase important?

Salary advancement is important because it can help a company attract the best employees. Offering competitive compensation can help companies ensure that employees choose them instead of other companies. It can also help ensure that employees feel satisfied with their pay.

A company’s salary progression structure can also serve as a clear path to employee salary goals. An employee can use the structure to determine his salary potential during his time at the company. This can make them more likely to keep working for the company over time, which can lead to increased employee retention.

related: 20 Strategies for Employee Retention

8 Types of Salary Increases

Here is a list of the several types of salary progressions that employers use:

1. Length of time planned

Many companies increase their workers’ compensation based on how long they have been employed. For example, a company may increase an employee’s salary by $5,000 per year every two years. This type of structure rewards employees who stay with the company for many years, promoting employee retention.

2. Competitive Rates

Some companies also adjust their pay rates to remain competitive with other companies. They can do this by researching other companies and determining if they can match their pay rates with their resources. It is important for companies to remain competitive in order to persuade top employees to choose them over other companies.

related: Competitive Pay: What you need to know

3. Company Performance

Companies may also base employee compensation on the overall performance of the organization as a whole. They can use the metrics to assess company performance and determine appropriate pay rates. This structure can help employees feel connected to the success of the company.

4. Personal Performance

Many companies also offer pay increases to employees with strong personal performance. The purpose of this type of pay progression structure is to encourage employees to excel in their jobs. This structure motivates individuals to perform at a higher level, which can increase employee morale. Companies can base performance on specific achievements or overall contributions to the company.

related: How To Get A Raise: 10 Tips To Prove You Deserve A Raise At Work

5. Team Performance

As with individual performance, some companies base their pay rates on the performance of the team. They use metrics to review the performance of entire teams and determine appropriate pay increases. This type of salary progression can encourage teamwork and commitment to the company.

6. Skill Development

Often, companies also increase employees’ salaries in exchange for developing new skills. The purpose of this increment structure is to encourage employees to build such skill sets that can make them better at their jobs. This can make these employees an asset to the organization.

7. Inflation Related Wage Increases

Wage rates may also change due to inflation. This is when surrounding prices are rising, so the company increases employee compensation to keep up with these changes. For example, if the cost of living in a company city increases, the company may increase its pay rates so that employees can live comfortably in the city.

related: What is the average cost of living? Definition and how to calculate

8. Publicity

Some companies also provide salary increase based on promotion. In this case, top-performing employees move into higher-level roles and receive a similar pay increase. This type of structure can motivate employees to improve and move forward in the company. This can help companies attract employees who stay for many years and work at multiple levels, making a significant contribution to the organization.

related: Everything you need to know about compensation and benefits

Tips for Choosing a Salary Progression Type

Here are some tips for choosing the right salary progression structure for your company:

Think about your resources

Another trick is to think about your company’s financial resources. Taking into account the financial situation of your company can help you determine which pay progression structures are realistic. For example, if your company is in a strong financial position, you may be able to increase employees’ wages by $5,000 a year every two years. A smaller company with less stability may choose a pay structure based on the company’s performance, providing increments commensurate with the company’s success.

related: Types of Pay Structures and When to Use Them

refer to your goals

You can also use your company’s goals to help you choose a salary progression structure. For example, if your company wants to stay ahead of its competitors, you can choose a competitive structure that attracts top employees. If you’re more focused on developing your workforce, you can choose a skills-based structure to encourage employees to improve.

consider external factors

Another tip for choosing a salary progression structure is to think about external factors that affect your company and employees. For example, if you live in a location with a high cost of living, you may choose an inflation-related salary structure. This structure can help your company ensure that employees are well enough to live comfortably in your place. You can also inspect the salary structures of other companies in your area to make sure your company can compete with theirs.

Back to top button