Global Salary Grades or Global Salary Structure?

Author:
Warren Heaps – Birches Group LLC

Recently a reader posed a question to me:

“My company has expanded into ten new countries and I’m trying to establish a global salary structure.  With all the different exchange rates, I’m finding it difficult to come up with one structure that works everywhere.  Can you give me some advice?”

I provided a short answer to the reader, which I will share here, along with some additional information.  First, though, some clarifying definitions, because I believe there is some confusion with terminology (which provided the name of this post).

Global Salary Grades refers to a standardized method of classifying positions across a global enterprise.  Alternative titles would be global bands or global job evaluation. Employers often adopt global salary grades to enable internal comparisons and standardize certain elements of compensation and benefits, such as short- and long-term incentives.  For example, global salary grades helps answer the question “is the Brand Manager position in Greece equivalent to the Associate Brand Manager in France or the Marketing Manager in Kenya?”  Or, all staff in band C or higher are eligible for equity compensation awards.

Salary Structure is the term used to refer to the salary ranges associated with salary grades.  A Global Salary Structure, by it’s very name, would imply a single structure for all locations globally.  Sometimes you may also see this referenced as an international salary range. Some companies use a global salary structure to manage a cadre of international assignees (usually based on the headquarters market).  International organizations such as the World Bank and the United Nations, and many international NGOs, use international salary structures in managing their international (expatriate) staff as well. But it would be very unusual to have a global salary structure applicable to all staff in an organization.

Global Grades or Global Structure – Which do I need?

If you are managing a global enterprise, global grades can be very useful in several respects.  In addition to the examples above allowing comparison of equivalent positions across different markets with varying titles, and standardization of executive compensation programs, global grades allow the organization to establish leading talent management processes.  The global grades will help establish competencies and  career tracks, and the related training and development that is required to train future leaders.  Global grades also help companies manage succession planning more easily, by providing a common language to describe the challenges and complexities of an individual position.

Global salary structures are useful, but in a much more limited way.  These structures apply to relatively few people in the organization – those that are deployed globally and move from place to place as part of their career.  Usually this means executives and those on the fast track to higher level positions. It is also common to see global structures applied to highly technical jobs, such as those in the oil, engineering and construction, and investment banking industries.  In fact, you may encounter global structures for any field of work experiencing global talent shortages and requiring highly specialized education and training.

But what about the salary ranges for the rest of us?

Salary structures are a very useful tool for all organizations.  They help ensure consistency and avoid discrimination, control costs, and together with a strong performance management process, allow managers to differentiate between different positions and varying levels of performance amongst the team.  Each country is a different market, however, and therefore, you need to build your structure separately for each one. Market data plays a key role here, since the structure must be anchored to the market in which you are competing for talent.

In the end, if you design a global grading system with local pay structures, you’ll get it right.  The grades will give you global consistency while the structures will be tailored to the local market, guided by your global compensation philosophy, which provides standards for each country to meet. You can read more about designing salary structures in my post entitled “Ten Steps For Building A Salary Structure.”

What is your experience in managing salary grades and salary structures? Please share your thoughts in the comments.

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