Broadbanding pay structure: the best setup for a company under 200 employees

For most US companies under 200 employees, the best broadband setup is four to six bands at roughly 55 to 60 percent range spread, mapped to real changes in the work rather than to titles. Collapsing a twelve grade ladder into four bands over the same pay span moves range spread from 30 to 57 percent, midpoint progression from 10 to 33 percent, and overlap from 66.7 percent down to 42.2 percent. Budget for the two costs nobody mentions: promotions get rare, and a 57 percent band is awkward to post as a salary range.

Broadbanding gets written about as a philosophy. It is really an arithmetic trade, and you can see the whole trade before you commit to it. Every number below comes from one worked structure, so you can check each step rather than take a consultant's word for what happens when the grades come out.

The trade, in one table

Start with a conventional twelve grade ladder. Grade 1 has a midpoint of $42,000, every grade runs a 30 percent range spread, and midpoints are 10 percent apart. That puts the bottom of the structure at $36,522 and the top at $135,461. Now collapse it into four bands, three old grades each, over exactly the same span. Nothing about what you pay anybody has changed yet.

Computed by Wagelist from the stated structure. Ranges are built symmetrically around each midpoint, and each band runs from the minimum of its lowest grade to the maximum of its highest.

One distinction before anything else, because the word covers two very different designs. What is modelled here is moderate banding: four bands near 57 percent spread, which is roughly twice a normal grade. The 1990s version of broadbanding meant two or three bands at 100 percent spread or more, and we still argue against that one for a company this size in pay grades vs salary bands. A band you cannot explain to the person inside it is not flexibility, it is an unpriced decision waiting to be questioned.

Broad bands overlap less, not more

This is the line that surprises people, and it is worth getting right before you present the idea to anyone. The usual intuition is that wide bands must overlap heavily because they are wide. Measured the normal way, as a share of each range, the opposite happens: 66.7 percent becomes 42.2 percent.

The reason is a relationship that holds in any structure where the ranges share a spread. Overlap equals 1 minus midpoint progression divided by range spread. Collapsing three grades into one band roughly doubles the spread, but it triples the progression, because the midpoints of the surviving bands are now three old grades apart. Progression rises faster than spread, so overlap falls. You can check the arithmetic on any structure of your own in the salary range overlap calculator, which also shows the same identity holding across the federal General Schedule.

In dollars the intuition is right. The shared money between the bottom two bands is $8,838 against $7,304 in the grade version, and by the top of the structure it is $15,658. So both claims you will read are true, and the argument in the room is usually about which denominator somebody used rather than about the structure. Say which one you mean.

The cost you are actually paying: promotions

Twelve grades give eleven promotion steps. Four bands give three. That is the real change, and it lands on people rather than on spreadsheets. In the grade version a promotion moves the midpoint $4,200, which is small but can happen every couple of years. In the band version a promotion moves the midpoint $15,552, which is a genuine event, and most people will see at most two of them in a decade.

Total pay growth over a career is nearly identical. What changes is the shape: frequent small recognition versus rare large recognition. If your managers currently use a grade bump as the way to say well done, taking eight of those away without replacing them is how broadbanding goes wrong. The replacement has to be explicit, usually a published set of in-band levels that carry no separate range but do carry a name and a pay zone.

That is also where the honest readiness question sits. Broadbanding hands the pay decision to managers, because a 57 percent band no longer tells them what to pay. Some management teams can do that and some cannot, and it is worth measuring how your organization actually makes decisions before you remove the guardrails rather than after.

Where broad bands collide with posted salary ranges

This part is newer than most broadbanding writing, and it matters if you hire in Colorado, Washington, New York, California, Illinois or any of the other states with posting rules. A band is not a range for a job. Band 2 in the example above runs $48,610 to $76,464, and no single opening in that band is genuinely worth anything in that whole span.

Those statutes ask for the range the employer in good faith expects to pay for the specific role being advertised. Pasting the band into the posting is easy and almost certainly not a good faith range, while inventing a narrower number for each ad reintroduces the per-job pricing that broadbanding was supposed to remove. The working answer most companies land on is to keep the broad band for internal pay administration and to hold a separate, narrower posted range per job family, priced from market data. The state by state rules are on pay transparency laws, and how to build the posted number is on job posting salary ranges.

How to set the bands for a company under 200

Do not start from a number of bands. Start from the points where the work genuinely changes, because those are the boundaries you will be able to defend to a manager who disagrees.

• List the real levels of work you have, not the titles. Most companies under 200 have four to six: doing the work with direction, doing it independently, owning an area, running a function, running the company. Titles multiply, levels of work do not.
• Price the bottom and the top of each level from market data, job by job, and let the band run from the lowest minimum to the highest maximum inside it. The spread is an output, which is why you often land near 55 to 60 percent without aiming for it.
• Check the overlap that falls out. If it comes in above 60 percent your bands are too close together and you probably have one too many. Below about 25 percent and somebody at the top of a band cannot be promoted without an unaffordable jump.
• Name in-band zones before you launch, not after the first person asks why nobody gets promoted any more. Three zones per band, tied to proficiency rather than tenure, is enough.
• Keep a separate posted range per job family. See the section above. This is the step companies skip and then fix under deadline pressure.

When a grade ladder is still the better answer

Broadbanding is not automatically the modern choice. Keep narrow grades when the work is genuinely stepped and pay has to be predictable: hourly operations, licensed or certified roles, anything covered by a collective agreement, and anywhere a regulator or a customer audits your pay practices. The federal General Schedule keeps fifteen grades at 30 percent spread for exactly this reason, and it is the largest salary structure in the country.

Keep grades too if your managers are new, if your pay data is thin, or if you have just been through a pay equity finding. Wide bands make discretion cheap to exercise and expensive to explain, and discretion is where unexplained pay gaps grow. Run a pay equity audit on your current structure before you widen anything.

Broadbanding questions people actually ask

What is broadbanding in compensation?

Broadbanding collapses many narrow pay grades into a few wide bands, each covering several levels of work. A twelve grade ladder running 30 percent range spread becomes four bands running 57 percent spread over the same total pay span. Managers get more room to set pay inside a band and far fewer promotion steps to hand out.

How many broad bands should a company have?

Four to six for most companies under 200 people, mapped to how the work actually changes: individual contributor, senior individual contributor, manager, leader. Fewer than four and the bottom band spans work that has nothing in common. More than six and you have rebuilt a grade ladder with wider ranges.

Do broad bands overlap more than pay grades?

In dollars yes, as a percentage no. Collapsing a twelve grade ladder into four bands over the same pay span takes overlap from 66.7 percent of each range down to 42.2 percent, while the shared dollars rise from about $7,300 to $8,800 at the bottom of the structure. Both statements are true and people talk past each other.

What are the disadvantages of broadbanding?

Promotions become rare, so the recognition your grade ladder used to supply has to come from somewhere else. Pay decisions move to managers, which needs training and audit. And a wide band is hard to post as a good faith salary range in states that require one, because the band is not the range for any single job.

Is broadbanding right for a small company?

The moderate version usually is: four to six bands near 57 percent spread. The 1990s version, two or three bands at 100 percent spread or more, is not, because a range that wide is hard to explain and hard to post in good faith. A company under 200 rarely has enough distinct levels of work to justify twelve grades, and maintaining twelve priced ranges costs more analyst time than it returns.

How do you set the range spread for a broad band?

Work backward from the pay span you already have. Take the minimum of the lowest job in the band and the maximum of the highest, and the spread falls out. Collapsing three 30 percent grades with 10 percent midpoint progression gives a 57.3 percent band, which is the normal broadband width.

Price the levels first, then decide how many bands

Everything above depends on having a defensible market number for each level of work. Without that, broadbanding is just erasing lines on a chart and hoping the managers guess well. Price each job from public US wage data, see where the real breaks are, and the number of bands tends to announce itself. The mechanics are in salary structure design, the midpoint side is in choosing midpoint progression, and you can build a band for a real role from the panel on this page.

Sources: Salary Table 2026-GS, US Office of Personnel Management (5 U.S.C. 5332, administered under 5 CFR part 531). Structure figures computed by Wagelist from the worked example stated above the table.