Broadbanding

Broadbanding is used by Payroll Departments in Human resource management.

Broadbanding defined

Broadbanding is a job grading structure that falls between using spot salaries vs. many job grades to determine what to pay particular positions and incumbents within those positions. While broadbanding gives the organization using it some broad job classifications, it does not have as many distinct job grades as traditional salary structures do.^[1] Thus, broadbanding reduces the emphasis on ‘status’ or hierarchy and places more of an emphasis on lateral job movement within the company. In a broadbanding structure an employee can be more easily rewarded for lateral movement or skills development, whereas in traditional multiple grade salary structures pay progression happens primarily via job promotion. In this way, broadbanding is a more flexible pay system. This flexibility, however, can lead to internal pay relativity problems as there isn’t as much control over salary progression as there would be within a traditional multi-level grading structure.

Selection of broadbanding

Broadbanding works better for some organizations than others.^[2] Hierarchical and/or risk averse companies with a preference for well defined policies and procedures would be better served by a traditional multi-grade structure. Flat organizations that are flexible, have a higher tolerance for ambiguity, and encourage lateral or cross functional movement would be good candidates for broadbanding.

Also, implementing broadbands in some countries may be easier than in others. In countries where promotions and titles are very important socially, companies may need to consider letting employees use an external business title based on employee age or years of service, that is different than the job title used for position grading internally. Also, some employees may feel lost, or not know how to build their careers without a vertical corporate ladder to climb. In this case, the company will need to be able to give examples to the employees of how lateral movement can enhance their career opportunities.

For a suitable organization in the right cultural setting, broadbanding can do the following:

• Reward performance more efficiently – as the pay ranges are wide, the company has the flexibility to reward a star performer, even when they aren’t getting promoted.

• Take the emphasis off of job evaluation – because the number of levels have been reduced, job evaluation can be streamlined as there aren’t as many distinct grades that need to be considered when slotting a job into the structure.

• Manage a flexible/mobile workforce – for companies that have staffing needs that change frequently or are difficult to predict, or work within a business environment that is in flux, broadbanding offers a program that is easier to maintain than a traditional system with many distinct levels.

One concern noted by companies that have implemented broadbanding is that compensation costs may go up. This is due to the wider than normal band taking away that more graduated top end control on salary levels. This can be effectively managed through the use of market data, in order to help managers to validate their pay decisions for a particular employee to the external market before proceeding to give higher than normal pay increases.

Broadbanding, like other grading systems, relies on the buy-in of all key stakeholders including the business managers, HR managers, and employees. Tailored communication to each of these groups will go a long way towards ensuring the successful implementation of a broadbanding program.

References

External links

• industry definition of Broadbanding