Which are the two main types of pay structures?

The primary focus of pay structures lies in how compensation is organized and administered within an organization. The correct pairing of pay structures emphasizes key methodologies used in structuring employee pay.

Broadbanding refers to the practice of consolidating multiple salary grades into fewer broad bands. This approach allows for greater flexibility in compensation and helps organizations adapt more readily to changing market conditions. It simplifies the pay structure by reducing the number of grades, which can facilitate career progression and movement within the organization.

Traditional pay grades, on the other hand, are a more conventional method where jobs are categorized into defined levels or grades, each with a corresponding salary range. This method provides a clear framework for determining pay based on job responsibilities, ensuring consistency and equity in compensation across similar roles.

Together, broadbanding and traditional pay grades represent two fundamental strategies used to create equitable and competitive compensation structures, focusing on how organizations manage and distribute pay to meet both internal and external equity considerations. This enables companies to align their pay practices with their overall talent management strategies and operational goals.