How Does a Salary Range Work?
Salary range is the range of pay established by employers to pay to employees performing a particular job or function. The salary range generally has a minimum pay rate, a maximum pay rate, and a series of mid-range opportunities for pay increases.
The salary range is determined by market pay rates, established through market pay studies, for people doing similar work in similar industries in the same region of the country.
Pay rates and salary ranges are also set up by individual employers and recognize the level of education, knowledge, skill, and experience needed to perform each job.
The salary range should reflect employer needs such as the overlap in salary ranges that will allow career development and pay increases without promotion at each level. It also considers the percentage of increase the organization will offer an employee for a promotion.
The salary range for executive-level positions is normally the largest. The salary range for lower-level positions is normally the narrowest. There is always more flexibility in the salary range with regard to senior leaders because their decisions impact the bottom-line and have a major effect across the entire organization.
What Employers Look at to Determine Salaries
Many companies participate in salary market surveys to create a trustworthy resource for salary research. More and more salary research is occurring online using salary calculators.
The salary range is also affected by additional demographic and market factors. These factors include the number of people available to perform a specific job in the employer’s region, competition for employees with the needed skills and education, and the availability of jobs.
In large organizations, an entire salary (or pay structure) is established to classify jobs, the relationship of one job to another, and the salary (or pay) ranges that fairly compensate the individuals performing the jobs.
In the end, you want to create salary ranges that motivate your employees to contribute. You also want to attract and retain the most superior employees to work in your organization.
How to Offer a Salary That Motivates Employees
Available information online makes researching salary ranges easier than previously—but, also trickier. The role of salary in helping you create a motivated, contributing workforce is inestimable.
These tips will help you address pay and salary range issues in a way that contributes to employee motivation in your organization.
Determine Salary Philosophy
Determine your organization's salary philosophy. Do you believe in raising the level of base salaries in your organization, or do you appreciate the flexibility of variable pay?
A growing, entrepreneurial company, with variable sales and income, may find itself better off controlling the levels of base salaries. When times are good, the company can tie bonus dollars to goals achieved. In lean times, when money is limited, the company is not obligated to have high base salaries.
A strategically forward-thinking company, with fairly stable sales and earnings, may put more money in base salary.
Find Comparison Factors for Salary
The big question is whether you are competitive within your local market for most of your positions.
Start by researching the salary range for similar positions and job descriptions.
The job description is particularly important for comparisons but usually harder to find for comparison. Determine whether you are competitive with similar positions with organizations that have a similar size, sales volume, and market share. If you can find companies in the same industry, especially in your area or region, that is another good comparison source.
What Goals Must Salary Help You Achieve?
Pay must relate to the accomplishment of goals, the company mission, and vision. Any system that offers an employee the average increase for their industry or length of service (usually 1-4 percent) is counter-productive to goal accomplishment. Even an above-average increase that differentiates one staff person from another can demotivate.
Additionally, your pay system must help you create the work culture you desire. Paying an individual for his or her solo performance accomplishments alone, will not help you develop the team environment you want to achieve in your workplace
Therefore, you must carefully define the work culture that you want to create and pay the employees commensurate with their support of (and contribution) to that culture.
Finally, your salary strategy must align with your human resources goals and strategies. If the HR function is charged with developing a highly-skilled, outstanding workforce, you must pay above the industry or regional averages to attract the quality of employees you seek.
Paying less than comparable firms will bring you mediocre employees and fail to fulfill your desire to create an outstanding workforce. If on the other hand, the HR strategy is to get cheap labor in the door quickly, with little regard for turnover, you can pay people less salary.
Assess the Competition and Labor Markets
When unemployment is high, skilled people are available because of job loss and the economic downturn. Recently, however, the economic reality is that you may have had to hire good people for more money than in the past—because things were brighter. In the near future, you may have an easier time hiring skilled people once again. The market is ever-changing based on economics and what s happening in the world.
This economic reality is constantly changing and it affects the economic realities of salaries for employers and employees. In upcoming years, the war for talent, which is expected to occur as employers compete for fewer people with highly needed skills, the need for a fair, market-driven salary range is a given.
If you overpay or underpay an employee, it will eventually come back to haunt you. Overpay and you risk throwing your salary range off-kilter. It becomes economically unsustainable and unfair to longer-term employees who may make less than new employees.
If you try to underpay, even if an employee accepts a job, he or she may never feel valued by your organization and will continue to job search, using your company as a resting place until the right offer arrives. Nothing impacts employee morale as much as individuals who feel they are underpaid in comparison with others based on their contribution and that of other similar jobs.
Tout Your Benefits Package Role in Salary Satisfaction
An organization that offers better than average benefits may pay less salary and still have motivated, contributing employees. If your health plan fees go up and you continue to pay the cost, this is the same as money put in your employees’ pockets.
The range of benefits you offer, and their cost to the employer, is a critical component of any salary approach. The biggest mistake organizations make is the failure to communicate the value of the benefits offered.
Determine Bonus Philosophy and Potential
Ways to address bonuses, as part of your overall pay system, are limited only by your imagination. You may pay a bonus that is determined individually based on the value of the goals accomplished and the person to your organization. You may give all employees the same bonus, based on group goal attainment, across the board.
You may also use profit sharing in which a portion of company profits is paid out equally to every person who was employed during the time period.
Communicate Your Salary Philosophy and Approach
In many organizations, who gets what and why is a cause for consternation, gossip, demotivation, and unhappiness. The more transparent you make your pay and salary philosophy and determinations, the more likely you are to achieve positive employee morale and motivation.
Don’t keep your salary philosophy a secret. Even though individual compensation is confidential, your methods for determining pay must be clear and understandable to all employees.
Recognize That Salary Ranges Are Becoming Less Used
Salary ranges are becoming less relevant in the modern world of HR, but they do provide several essential and needed banks for employers to erect for employees.
According to a compensation consultant, Ann Bares in "Compensation Force," "I've had the chance to work with many organizations who don't have a formal salary structure, either smaller organizations yet to put in place any pay rules and policies or more established businesses who have (at some point) ditched their structures in an attempt to foster more 'flexibility.' What I've found, more times than not is that salary decision in these places are all over the map, with little rhyme or reason, and often made in response to pressure (employee complaints or implicit/explicit threats of leaving). And everyone knows it. Especially the employees.
"Having a salary structure of some kind in place ensures that there is a set of guardrails to prevent pay decisions from falling too far off the road. Perhaps more importantly, having a structure in place gives employees at least a minimal amount of assurance that there are rules which are followed and those salary decisions aren't based entirely on whim, favoritism or discrimination."
The Bottom Line
In the end, if you take these tips to heart and apply them to your organization, you will increase the likelihood that you’ll have happy, motivated employees.
May 2020 National Occupational Employment and Wage Estimates
to the OEWS Update
These estimates are calculated with data collected from employers in all industry sectors in metropolitan and nonmetropolitan areas in every state and the District of Columbia.
Additional information, including the hourly and annual 10th, 25th, 75th, and 90th percentile wages, is available in the downloadable XLS file.
Major Occupational Groups (Note--clicking a link will scroll the page to the occupational group):
- 00-0000 All Occupations
- 11-0000 Management Occupations
- 13-0000 Business and Financial Operations Occupations
- 15-0000 Computer and Mathematical Occupations
- 17-0000 Architecture and Engineering Occupations
- 19-0000 Life, Physical, and Social Science Occupations
- 21-0000 Community and Social Service Occupations
- 23-0000 Legal Occupations
- 25-0000 Educational Instruction and Library Occupations
- 27-0000 Arts, Design, Entertainment, Sports, and Media Occupations
- 29-0000 Healthcare Practitioners and Technical Occupations
- 31-0000 Healthcare Support Occupations
- 33-0000 Protective Service Occupations
- 35-0000 Food Preparation and Serving Related Occupations
- 37-0000 Building and Grounds Cleaning and Maintenance Occupations
- 39-0000 Personal Care and Service Occupations
- 41-0000 Sales and Related Occupations
- 43-0000 Office and Administrative Support Occupations
- 45-0000 Farming, Fishing, and Forestry Occupations
- 47-0000 Construction and Extraction Occupations
- 49-0000 Installation, Maintenance, and Repair Occupations
- 51-0000 Production Occupations
- 53-0000 Transportation and Material Moving Occupations
To sort this table by a different column, click on the column header
Salary Range: Definition and How It's Used by Employers
During the interview process, hiring managers may ask what your desired salary range is. This helps them better understand how much they should budget for your compensation. When determining your salary range, it's best to research online using a salary calculator and factor in elements like your experience, education and region you work in. In this article, we discuss what a range salary is, factors that affect it, the difference between a salary range for both employers and employees, how employers determine salary ranges and how to negotiate your salary with hiring managers.
What is a salary range?
A salary range is the payment amount between a set of low to high numbers that an employee wants to receive once they're hired by a company. The salary range includes a low, mid and maximum salary point. For example, if an employee mentions that their salary range is $40,000 to $50,000, this means they'd like to receive a salary within those numbers. Posing a salary range can be a good negotiating tool for employers and interviewees alike.
When are range salaries used?
An employee uses a salary range typically during the interview or offer phase of the job search process. They give the hiring manager an idea of the compensation amount they prefer based on elements like job demand and employee expertise. The employer will examine the salary range and determine the necessary amount to offer the employee within that range.
The salary range is an approximate estimate to help employers understand what the employee hopes to receive and how they value their worth. It's best that employees provide a salary range with a low point being the lowest they can receive while remaining financially stable. Providing companies with a salary range is an effective method potential employees may use to negotiate their pay and benefits.
Related:How To Talk About Salary in a Job Interview
Factors that affect salary range
As you determine the salary range to request, you should research and consider various elements before giving the hiring manager any estimations. Factors that affect salary ranges for different jobs include:
- How long you've worked in the field or industry where you're applying
- The type of degree you've received
- If there are a low number of employees available within your position
- If the company is trying to recruit you and plans to offer more than what you're making at your current role
- If you have strong recommendations from your previous employers and references
- If you possess many relevant skills and hold advanced certifications
- Cost of living in your region
- Common pay rates within the market you plan to work in
Job applicant vs. employer salary range
While the salary range for a job applicant is the estimation of pay they'd like to receive, it has a different meaning for an employer. If an employer is providing a salary range, they're giving the range of payment they can supply an employee from lowest to highest.
The salary range features the starting pay for the employee, which is the minimum pay rate. They factor in the raises, promotions and pay bonuses they plan to give an employee as they continue working for the company. This number is the maximum pay rate.
For example, if the employer offers the employee a role and establishes their salary range as $50,000 to $60,000, this means they're budgeting this much to pay the employee. $50,000 is what the starting salary offer is and $60,000 is what they plan to eventually pay the employee after granting pay raises over a few years working in the role.
The width of the salary range can vary depending on the role in question. Executives applying for leadership roles usually receive a larger salary range than an employee applying for a lower-level position.
How do employers determine salary ranges?
When employers are deciding the salary range to offer their employees, they often conduct research online to determine an accurate amount. They may look for salary calculators that gather how much the average employee within that field makes. This information is based on market surveys that report common salary ranges for specific job titles in different areas. They also consider factors like experience, education and how many people are applying to these roles.
Employers take this information and use it to form their own estimates based on their company's budget and the candidate's qualifications. They also balance this amount with the benefits they plan to offer the employee. Hiring managers may also analyze their company's values and culture before deciding on a payment amount. If the company prides itself on valuing their employees, then they may use compensation to prove to employees how much they appreciate their work.
How to negotiate a salary based on salary range
During the interview and job offer process, employers may present you with a salary that you may want to adjust according to your financial and personal needs. Follow the steps below to negotiate a salary based on the salary range you provide:
- Analyze your skills and expertise.
- Research common salaries for your role.
- Determine your salary range and confidently present it to the hiring manager.
- Try to negotiate additional benefits.
- Show your gratitude and appreciation.
1. Analyze your skills and expertise
Before negotiating with the hiring manager, plan your talking points so you can confidently explain your negotiation terms and why you deserve them. You can do this by evaluating the qualities and experience you have and presenting them to the employer. Write down the skills, experience, education and any other qualifications you hold that you believe make you worthy of the salary you desire. Practice and prepare these before speaking with the hiring manager.
2. Research common salaries for your role
Conduct online research to ensure you are negotiating for an appropriate amount. Look for credible salary calculators that provide an average amount of salary an employee may make in the role you're applying for. Try to find a calculator that estimates how much someone may make in your specific area as well. Keep these calculations in mind when negotiating with the employer.
Related:13 Tips to Negotiate Your Salary and Job Offer
3. Determine your salary range and confidently present it to the hiring manager
Once you have gained a clearer idea of the salary to ask for, determine your salary range and present it to the hiring manager. It's best to determine the desired amount you want to make and use this as the midrange. Make sure the minimum pay rate of your salary range is enough to keep you financially stable.
Once you've determined this range, bring it to the hiring manager and give them this information with confidence. If they seem hesitant, explain your prepared reasons of why you believe you deserve this amount.
4. Try to negotiate additional benefits
If the hiring manager offers you a lower amount, ask them what benefits they will provide. They may have strong benefits to grant you in place of a higher salary. These can be extra vacation days, more paid holidays or effective health plans. Evaluate what you value most in the compensation you receive. If vacation days are more important to you than higher pay, try to ask for that instead of a higher salary.
Related:3 Things To Know About Unlimited Vacation and Paid Time off Policies
5. Show your gratitude and appreciation
Once you both come to an agreement on satisfactory terms, show courtesy by expressing appreciation for the role and salary offer. Since you'll be working with them every day, it's best to start your relationship on a professional and respectful note. If you're meeting in person, shake their hand and thank them for their time and salary offer.
Average Salary Information for U.S. Workers
How much is the average U.S. worker's salary? Salaries vary based on gender, education, occupation, industry, geographical location, ethnicity, and other factors. Learn more information about salaries in a variety of categories and calculators to use to determine the salary for specific occupations.
Average Salary Information for U.S. Workers
According to the Bureau of Labor Statistics (BLS), the median wage for workers in the United States in the fourth quarter of 2020 was $984 per week or $51,168 per year (assuming 52 weeks of work per year). Wages were 5.7% higher than a year earlier.
Salaries can vary significantly based on both occupation and location.
What's considered a good salary in one job or metro area may not be in another. For example, workers in professional, management, and related occupations earned the highest pay. In these jobs, men earned a median annual salary of $81,744, while women earned a median annual salary of $60,736. However, in service occupations, men earned a median annual salary of $37,180, while women earned a median annual salary of $30,212.
Jobs in large metropolitan cities, which have higher costs of living, also tend to pay more than jobs in more rural and suburban areas.
Salary also varies by factors such as gender, education, and more.
Average Salaries for U.S. Men and Women
The BLS reports that, in the fourth quarter of 2020, men earned a median annual salary of $55,744, while women made a median annual salary of $46,488, or 83.4% of men’s earnings.
Average Salary by Race
Race and ethnicity also play a role in salaries for men and women. For example, White women earned 82.3% as much as their male counterparts, compared with 95.7% for Black women, 74.9% for Asian women, and 91.8% for Hispanic women.
However, Black men made a median annual salary of $42,120, which is only 73.1% of what White men earned ($57,616). The difference for women was a bit less; Black women’s median annual earnings were 85% ($38,584) of White women’s median annual earnings ($45,396).
The BLS also provides information on Hispanic and Asian wage earners, who earned a median annual salary of $38,584 and $65,572, respectively.
Average Salary by Age
Salaries also varied by age, but men and women had different earnings peaks. For example, men aged 45 to 54 had the highest median annual salary ($64,064). Women, on the other hand, earned the highest annual wages between ages 45 and 54 ($51,064).
Average Salary Based on Education
The BLS data clearly reveals that completing more education pays off. Workers aged 25 and over without a high school degree had median annual earnings of $31,616 over the fourth quarter of 2020 compared to $40,612 for high school graduates without a college degree. College graduates with at least a bachelor's degree earned a median salary of $73,892 annually.
How to Find the Typical Salary for a Job
When you are evaluating careers or job searching, it can be useful to know what you can expect to make. It can also be a good bargaining tool when you are negotiating a salary with a new employer or negotiating a pay raise with a current boss.
Review this list of salary profiles for a variety of occupations plus links to salary calculators and tools for comparing salaries and discovering how much you can earn.
Salary Tools and Cost-of-Living Calculators
There are a variety of calculators you can use to find out what the average salary is for a job in your occupation and location of interest. In addition, you can use a cost-of-living calculator to determine how much it actually costs to live in a specific location.
Understanding the average salaries in your profession and the cost of living in any given area will provide you with the facts you need whenever you are considering applying for a new job or moving to a different geographical region.
Zippia has an interactive tool you can use to see how your earnings compare to other people the same age, sex, and education level.
Glassdoor's Know Your Worth tool provides a free, personalized salary estimate based on the current job market. Provide information about your company, job title, location, and years of experience. The tool will then tell you if you are being paid below or above your market value.
Indeed Salary Search lets you search salaries by job title and compare salaries for similar jobs at different companies and different locations. The tool also provides information on typical benefits, plus career advice and job listings.
LinkedIn Salary is a calculator that provides the median salary for jobs in specific locations throughout the U.S. It shows the median base salary as well as the median total compensation (including benefits, bonuses, and more). You can narrow your search by location, industry, years of experience, and more.
PayScale’s Cost-of-Living Calculator allows you to compare your salary in your current location to typical salaries in other locations. The calculator will show you the difference in cost of living as well as the amount you would need to make in the new location to maintain your current standard of living.
PayScale’s Salary Survey will give you salary ranges for just about every occupation. You can narrow your search by location, years of experience, and more. You can also get information about average benefits.
Salary.com Benefits Wizard allows you to calculate your total compensation package (salary plus bonuses and benefits). You can then compare your package to industry averages.
Salary.com Salary Survey lets you explore salary ranges by location, years of experience, and more. You can also get information about typical benefits and see factors that affect your pay. Salary.com also lists job openings related to your search.
Salary ranges annual
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