BROADBANDING: Its Prospects and Drawbacks

Md. Mizanur Rahman, MBA (HRM), University of Dhaka.

September, 12, 2016

What is broadbanding?

Broadbanding can be defined as a strategy for salary structures that consolidate a large
number of pay grades into just a few wide levels or bands.

Consolidation of different pay grades for different level of jobs having different worth or
values on the basis difficulties of those jobs and skills and knowledges required to perform
those jobs.

This pay grouping or expanded pay grade might have a range varying from 50 percent to
more than 100 percent.

In broadbanding, HR professionals place jobs that were separated by one or more pay
grades in old pay structures into the same band under broadbanding system. For
example:- consolidating and merging grade A, B, and C into one broadband eliminates
the hierarchical differences among the jobs

The rate of pay for the broadband could vary from the minimum rate of pay of the lowest
pay grade in the sector to the maximum rate of pay of the highest pay grade in the sector.

Broad-banding eliminates narrow bands initiating wider bands and thus broadens
employees job duties and responsibilities.

Figure: Broadbanding structure and its relationship to traditional pay grades and ranges

Advantages of broadbanding

Streamlines Hierarchy: - Some companies establish broadbands for distinct employee

groups within the organizational hierarchy e.g.:- upper management, middle
management, professionals, and staff. This approach reduces management layers and
creates a flattening organization structure. This structure promotes quicker decision
making.

Broadbanding eliminates narrow job duties and responsibilities and broadens tasks and
duties resulting in encouraging employees to improve their competencies and engage in
career development.

Decentralizes compensation management & administration:- Broadbanding allows

immediate supervisor more authority to assign a rate of pay or give a pay increase to
subordinates. This transfer of authority and decentralization reduces some of the
bureaucratic control of the human resource department.

Boradbanding is also useful in designing a pay structure/plan for organizations that make
extensive use of teams. New team members having minimum levels of required
knowledge and skills could be paid at the lower end of the band and, as they acquire more

skills and knowledges and perform many complex and multiple assignments or jobs, or
work at different workstations, their pay could be increased upward through the band.

Lateral or horizontal promotions:- It promotes and facilitates internal movement within

the organization and is considered to put forward other attributes of a position, other
than the pay grade which is already disclosed.

Disadvantages of broadbanding

No Awareness of External Market Rates:- As boradbanding concept is still new and has
few applications, it is very difficult and almost impossible to find market rate for
broadbanding. With broadbanding, if a manager wants to pay at the market midpoint,
they are left baffled and guessing. Therefore there is no midpoint in a broad band. In this
case, the traditional salary bands cannot be compared against broad banding.

Reduced opportunities for promotions:Fewer salary bands lead to fewer opportunities to climb to the next band. The transition
from multiple narrowly defined pay grades to fewer broadbands reduces organizational
hierarchies that supports promotions.

Increased cost of payroll:- It is the general tendency of each and every skilled employees
to reach the maximum level of competency to be entitled to pay at the maximum level of
the broadband. The maximum rate within a broadband is considerably higher than the
maximum rate of most of the typical traditional pay grades.

Broadbanding vs. Traditional Organization Structure

Traditional Salary Structures

Broadbanding Salary Structures

1. Traditional salary structures are organized 1. Broadbanding has fewer structures or

with numerous layers and range structures
layers with wider salary ranges.
(that is, pay grades); each range has
relatively small distance (narrow bands).

2. In traditional structure, there is a 2. Broadbanding

promotes
flattening
hierarchical system which enables
organizational structure with few levels or
employees to be promoted from one pay
layers enabling reduced opportunities for
grade to another.
promotion.
3. More flexibility.

3. Little flexibility.

References:1. Bosamia.

K.

(2012)

Broadbanding Pay Structure. [Online] Available from:

https://www.scribd.com/presentation/104223766/Broadbanding-Pay-Structure.
[Accessed: 12th September 2016 at 3:08 p.m.].
2. Culpepper and Associates (2009) Salary Range Structure Practices.
Available

from:

[Online]

https://www.shrm.org/resourcesandtools/hr-

topics/compensation/pages/salaryrange.aspx. [Accessed: 14th September 2016 at

11:17 a.m.].
3. Dessler. G. (2008) Human Resource Management. 11th Ed. Pearson.
4. Henderson. Richard I. (2012) Compensation Management in a Knowledge-based

World. 10th Ed. Pearson, p.- 284-285.

5. Martocchio. Joseph J. (2011) Strategic Compensation: A Human Resource

Management Approach. 6th Ed. Pearson, p.- 203-204.

6. PayScale (2011). The Advantages of Broadbanding. [Online] Available from:
http://www.payscale.com/compensation-today/2011/04/advantages-ofbroadbanding. [Accessed: 12th September 2016 at 2:51 p.m.].
7. SlidePlayer (2015). COMPENSATION Part I 1. Chapter Objectives: Describe the various

forms of compensation. Explain the concept of equity in financial compensation.

8. Identify. [Online] Available from: http://slideplayer.com/slide/5312960/. [Accessed:
12th September 2016 at 3:04 p.m.].

9. Winning with Titan (2011). The Curses of Using a Broad Band Pay Structure. [Online]
Available from: https://hrscorecard.wordpress.com/2011/03/08/the-curses-of-usinga-broad-band-pay-structure/. [Accessed: 12th September 2016 at 3:11 p.m.].
10. www.whatishumanresource.com (2016) Broadbanding. [Online] Available from:
http://www.whatishumanresource.com/broadbanding. [Accessed: 12th September
2016 at 2:45 p.m.].

The End