How to Set Compensation Bands
Bands turn ad-hoc pay decisions into a repeatable system. Here’s how to build them on real benchmarks and keep them defensible.
Start with market data
A band needs a market anchor. Capture benchmarks per job title and location - p50, p75, p90 - each stored with its provider and date, so the band traces back to a sourced, dated reference rather than a guess.
Capture inputs
- Define the role and its leveling
- Capture benchmarks for the role and each key location
- Note the provider and capture date on each benchmark
- Decide the target percentile you pay to (e.g. p50 or p75)
Define the band
| Element | Basis |
|---|---|
| Midpoint | Your target percentile (e.g. benchmark p50) |
| Min | Midpoint less a spread (e.g. −15%) |
| Max | Midpoint plus a spread (e.g. +15%) |
| Compa-ratio | Employee salary ÷ midpoint |
Place employees and act
Compare each employee’s salary to the band via compa-ratio: below 1.0 is under midpoint, above 1.0 is over. Use it to spot who’s lagging their band going into a merit cycle and to keep offers inside range.
Keep bands fresh
Frequently asked questions
What data do I need to set bands?
Market benchmarks per role and location - p50/p75/p90 - captured in Fintra with the provider and date, plus a target percentile you pay to.
How do I place employees in a band?
Compute compa-ratio: salary divided by the band midpoint. Under 1.0 is below midpoint, over 1.0 is above.
How do I know when a band is stale?
Each benchmark stores its capture date, so you can see how old the underlying market data is and refresh accordingly.
Where does the benchmark data come from?
A provider interface - a mock provider for demos and a wired seam for a live provider like salary.com, which returns data when connected.
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