Pay Band

In a company without bands, every salary is decided from scratch. A candidate names a number, the founder weighs it against the budget and moves it up or down, and the figure is settled in that conversation. At ten people this works fine, because one person remembers all ten numbers.

Past thirty it starts to come apart. Two people doing the same work are $8,000 apart in annual pay and nobody can explain why. One of them joined when the company was desperate and asked for a lot. The other was in their first job and accepted the first number offered. The gap has nothing to do with skill and everything to do with timing and appetite for negotiation.

Gaps like that eventually surface. At Pagedeck two engineers at the same level turned out to be at $40,000 and $49,000, and the team learned it from someone who was leaving. The one on the low end spent six months hearing every conversation about performance as a conversation about money, and then left too.

Hiring gets awkward as well. Every time a role opens, whoever is recruiting has to ask the founder what number to say, and while they wait the candidate collects an offer elsewhere. A pay band takes a number that used to be improvised and moves it inside a range agreed on beforehand.

Draw a grid with job levels down one side and job families across the other, then write a range into every cell. A job level is a grade defined by scope of responsibility and expected capability, usually running from level one to level five. Engineering, design and sales command different market rates, so spreading them across the grid turns one table into a map of company pay.

Each cell holds three numbers: a floor, a midpoint and a ceiling. If engineering level three runs from $40,000 to $52,000 with a midpoint of $46,000, then anyone sitting in that cell is paid somewhere inside it. The figure in the cell is base salary — the fixed amount that arrives on the same day every month regardless of performance. Bonuses and equity are decided outside the band.

Building a band for the first time takes four steps.

1. Lay out the grid of families and levels. If nobody has written down what a level three can do, you get stuck on which cell each person belongs in before you get to any numbers.
2. Gather market rates for each cell. Published salaries on hiring platforms, compensation surveys run by investors, and the asking numbers from candidates over the last six months all work as inputs.
3. Decide where in that market you intend to sit. You can match the industry midpoint or pay at the 75th percentile. Matching the midpoint costs less and loses more candidates to competitors.
4. Write the floor and the ceiling. The spread is usually about 15 percent either side of the midpoint, so a $46,000 midpoint gives $40,000 to $52,000.

The spread exists because people need somewhere to move without changing levels. Someone who just joined starts between the floor and the midpoint and drifts toward the ceiling over a few years. At the ceiling the next increase is not a bigger number in the same cell but a promotion into the level above, where a new range applies and there is room again.

The first place is an offer — the package of terms presented to someone you want to hire. With a band, a recruiter quotes a number instead of waiting on the founder. If a candidate wants $58,000 and the level three ceiling is $52,000, there are two honest answers: look again at whether this is a level four, or make this person a documented exception.

The second is the annual pay review. If the level three midpoint is $46,000 and someone sits at $41,500, that becomes a raise the company owes regardless of how the performance conversation goes. Someone near the ceiling gets a smaller increase even after a strong year, and the question shifts to whether they are ready for the next level.

The third is planning what people will cost. Headcount is the number of people an organization is allowed to have, and once next year's plan says which levels get filled, multiplying by band midpoints gives a salary figure immediately. Three level threes and one level four come to roughly $200,000 in base salary, with payroll taxes and bonus accruals on top.

For a candidate, the band is a starting point for estimating total rewards — base salary, bonus, equity and benefits added into one figure. The band fixes only the base salary piece.

"This candidate is asking above the level three ceiling. I need a call on whether we re-level them or treat it as an exception."

Not a request to talk the number down, but a request to decide which cell the person belongs in.

"Four people are below the midpoint right now. That's where this raise cycle starts."

Raise money gets spent in order of position in the band before it gets spent in order of performance.

"Next year's bands go up about 3 percent once we rerun the market survey."

A band is not written once and left alone; it gets refitted every year.

The person who built the table at Pagedeck is Grace. After the gap between the two engineers became common knowledge and one of them resigned, she laid out four job families and five levels, filled the twenty cells from a compensation survey her investors ran, and then placed all forty-five employees on the grid. Six of them landed below the floor of their own cell. Those six went first in the next raise cycle.

The usual reading is that a band is a device for holding pay down. A ceiling is written on the page, so it looks built to end negotiation. But the same page carries a floor, and that floor is the company committing to itself that nobody in this seat gets less. In practice it protects people who are bad at asking. Remove the band and the ceiling goes, but so does the floor, and pay goes back to rewarding whoever pushes hardest.

The other common mistake is treating the numbers as settled. They sit in a table, which makes them look permanent, and rerunning the survey every year is real work. But what a band tracks is the market, not the company's sense of itself. Leave it alone for two years and the level three floor drops below what other companies pay level twos. Patch around that with exceptions for new hires only, and you accumulate people who earn less than colleagues who arrived after them — and on the day that becomes known, the band stops being believed.