262 Human Resources Management for Public and Nonprofi t Organizations
market. It specifi es the pay objectives for employees performing at satisfac-
tory levels. The minimums and maximums are usually based on a com-
bination of the size of the range identifi ed in survey data and judgments
about how the ranges fi t the organization. These judgments are based on
a variety of factors, such as salaries paid by the organization ’ s competition,
the organization ’ s culture, and standard salaries across an occupational
classifi cation. For example, production and maintenance positions typi-
cally have ranges of 20 to 25 percent, whereas professional, administrative,
and managerial personnel might have ranges of 40 to 50 percent under
certain circumstances. Wider ranges are designed to refl ect greater discre-
tion, responsibility, and variations in performance. Pay ranges are useful
because they allow an organization to provide a competitive salary and
recognize individual differences among employees. Table 9.3 illustrates
current market rates and their minimums, maximums, and midpoints for
selected benchmark positions in local government.
When establishing pay ranges, employers must look at the degree of
overlap in adjacent pay ranges. Overlap is the amount of comparability
of pay between pay grades. The amount of overlap between pay grades
signifi es the similarities in the responsibilities, duties, and KSAOCs of the
jobs whose pay ranges overlap. Overlap between pay ranges permits more
valuable senior employees in lower - paying jobs to be paid more than new
employees in higher - level jobs who have not yet begun to make signifi cant
contributions to the organization (Henderson, 1989, 2000). In both Tables
9.1 and 9.2 , GS - 1 or Grade A employees at steps 5 and above receive
higher compensation than GS - 2 or Grade B employees at step 1.
When developing a salary structure, you may fi nd that certain jobs in
the organization have been underpaid or overpaid. Underpaid positions
are referred to as green - circled and overpaid positions as red - circled. To bring
these wages in line with market rates and internal equity standards, under-
paid employees should be given pay increases that raise their rates to at
least the minimum of the range for their pay grade. The salaries of over-
paid employees may need to be frozen until other jobs are brought into
line with them. Other options include cutting the wages to the maximum
in the pay range for the pay grade, increasing the employees ’ responsibili-
ties, or transferring or promoting them to positions in which they can be
paid their current rate.Compression Compression results when salaries for jobs fi lled from out-
side the organization are increasing faster than incumbent wages (that is,
when new employees are paid salaries that are comparable to those of