Compensation in a Remote World: Building Equitable Pay Bands

Creating effective pay bands is a balancing act. You need a system that’s structured enough to ensure everyone is being compensated fairly and flexible enough to attract, retain, and reward your top performers. And with more and more states enacting pay transparency laws, finding that balance is more important than ever.

At Stambaugh Ness, we work with AEC firms of all sizes to develop and implement effective compensation strategies. We understand your unique challenges in attracting and retaining top talent in a competitive market. In this blog post, we’ll explore the key things to keep in mind when creating pay bands that comply with the law and adapt to your organization’s needs.

The Power of Pay Bands

One effective strategy for minimizing pay disparities is implementing pay bands. These structured salary ranges help companies address compensation challenges while promoting pay transparency.

When designing pay bands, there are many considerations, including geography. Traditionally, organizations with multiple office locations have adjusted salary ranges based on local market conditions. Some companies pay employees in high-cost areas more, while others opt for a uniform approach across locations. The right strategy depends on your business model, talent acquisition needs, and compensation philosophy.

As remote work becomes more prevalent, defining clear geographic pay policies is essential. Having the right framework in place can help an organization move towards more transparency, increase confidence in pay decisions, and provide a guide for setting the right salary when hiring and/or promoting employees.

Creating Pay Bands: Go to the Source

To develop effective pay bands, you need reliable market data. Leveraging both industry and non-industry data can help ensure the right data is being used and that there are enough samples to increase confidence in the data.  Depending on the source, the data may reflect past conditions, requiring an organization to adjust for inflation and market trends, otherwise known as escalating the data. For example, if a survey is open from January 1st to the 31st, it is likely collecting data for the prior quarter or prior year.  One common approach to escalating data is to look at the Employment Cost Index (ECI), which measures how much employers’ costs for employee wages and benefits change over time.

For example, the ECI has shown annual increases of around 4-5% in recent years, making it a valuable tool for ensuring your pay bands remain competitive.

Many organizations will then turn to the Bureau of Labor Statistics (BLS) to determine the differences between cities and states so pay bands can be adjusted accordingly. The BLS uses a combination of factors to calculate the difference, including the Local Area Unemployment Statistics (LAUS) program and the Current Population Survey (CPS). This information has been helpful for organizations in making competitive offers when hiring employees and as a tool to ensure pay remains competitive in the local region for existing employees.

Types of Pay Bands

Now that you have your data, how should you structure your pay bands? Some organizations prefer broader bands that group similar jobs into wider salary ranges, providing flexibility for experience and performance. Others choose a more detailed structure with narrower bands for specific job roles, allowing for precise pay decisions. There are many approaches; the right structure depends on your organization’s size, complexity, and overall compensation philosophy.

Once your structure is in place, the next step is defining salary ranges within each band. These should include a minimum, midpoint, and maximum salary, helping to ensure internal equity while remaining competitive in the market.

Compliance and Flexibility: Striking the Right Balance

With more pay transparency laws, disclosing pay ranges is increasingly becoming required and not optional. But compliance shouldn’t limit your ability to attract and reward top performers, even if it means going beyond standard ranges.

When designing pay bands, it’s critical to build in flexibility. This can include:

• Market Adjustments: Regularly review and adjust pay ranges to reflect current market conditions and ensure competitiveness.
• Recognizing Unique Skills: Provide additional compensation for individuals with specialized skills or experience that goes beyond the typical requirements of the role.
• Performance-Based Pay: Enable compensation above peers to recognize and reward exceptional performance or contributions.

A pay band framework takes a little bit of art and science, to allow for organization specific nuances while preserving competitive compensation strategies. Compensation experts can help you design compliant yet adaptable pay bands for today and the future.

Next Steps

Pay bands can help ensure fair and competitive compensation across all geographies in today’s highly competitive hiring environment. As you’ve read, there is no one-size-fits-all strategy for pay bands. To dive deeper into best practices, join our upcoming webinar, Mastering Pay Bands: A Strategic Approach to Compensation, where I’ll provide actionable insights and guidance to help you create a compensation strategy that sets your organization up for success.