HomeBusiness DigestThe use of broad banding in compensation administration

The use of broad banding in compensation administration

Disadvantages of broad banding
Despite the attractiveness of the broad banding approach, some disadvantages may arise.

Memory Nguwi

Broad banding may result in high compensation costs that are not sustainable for the business. Because its philosophy is underpinned by significant pay differentials, it tends to results in higher costs for the employer.

Broad banding needs to be supported by strong and objective performance management and measurement system at all levels within the organisation. Without a strong and objective performance assessment system, salary allocation may end up being arbitrary or based on factors that do not add value to the business such as tenure and qualifications held by incumbents.

Without a strong buy-in from staff, broad banding may be rejected by employees as it is seen as elitist. Employees view broad banding in general as a system that promotes inequity.

It can face strong resistance in highly unionized environments.

Broad banding results in very few upward grade promotional opportunities as most roles will be bundled together in one grade. For your highly ambitious employees who look beyond the good pay, they may be forced to leave the organisation.

Broad banding makes it difficult to do salary market comparison based on grade value. Most organisations are not on this system. It is, therefore, possible roles grouped under broadband in your organisation may belong to different grades on the open market, making it difficult to do grade based market salary comparisons.

Without strong guidelines for managers on how salary adjustments and changes should be done, it can result in a chaotic approach by managers. Such an approach will result in complains of in inequity.

Implement broad banding

When implemented properly broad banding can bring several advantages. Certain key elements need to be done right from the start if broad banding is to work and bring value to your business. Here are the key elements

Make sure the jobs that are in one band are jobs of equal value. This will stop people from complaining. If this issue is addressed, the system is unlikely to be opposed by Unions.

Also, remember that the foundation of any sustainable pay structure is a credible job evaluation system which must be fully endorsed by all employees.

Once the job evaluation system with broad bands has been accepted, you can proceed to develop a pay structure based on the broadband model.

For the broad-banded pay structure to work, the pay range must be above 60% and the progression above 30%. Without adhering to proper pay structure principles, the benefits of broad banding will be short-lived.

Involve your employees from stage one, especially clearly outlining the benefits of broad banding to them. Communication is key to this process. You may require to do roadshows to educate your employees on why the organisation has adopted a broad handed structure and how they will benefit

Before you even start the process of developing a broad-banded structure, you must ensure you have a credible performance management system. This will allow you to administer a credible merit increases system within the broad-banded framework.

The broad-banded structure must be accompanied by very clear policies and procedures to aid in the administration of this practice.

The broadband structure must be designed such that the focus is on the person and not the job. While job evaluation and traditional pay structures focus on the job, broadband focuses on rewarding the individual for their contribution.

The broad banding approach to remuneration and compensation structuring can work provided the necessary design precautions have been taken into consideration.

In cases where design precautions already highlighted are not taken into consideration, broad banding can bring more problems for the organisation.In summary broad banding, is a good system provided the right designs issues are addressed in the initial stages of the design process? Research shows that broad banding prevalence in organisations ranges from 6% to 10%.

The uptake is not that good and it would seem mots organisation are cautions to adopt the broadband approach.

Nguwi is an occupational psychologist, data scientist, speaker and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and HR consulting firm. https://www.linkedin.com/in/memorynguwi/ Phone +263 24 248 1 946-48/ 2290 0276, cell number +263 772 356 361 or e-mail: mnguwi@ipcconsultants.com or visit ipcconsultants.com.

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