Let's talk salary: The ultimate guide to compensation ranges

You’ve probably been in one of these situations before. 

Let’s say you’re job searching. You’ve submitted a handful of applications to jobs that you’re interested in. On the online application, you’re asked to submit your preferred compensation range. You pick a range in the drop-down selection that seems best to you, but you’re still not really sure. When the recruiter calls you for an initial interview, they ask you again. “What’s your ideal salary range?” 

Or, let’s say you’re a hiring manager. You’ve finally been approved for two new headcount on your team. You write the job descriptions and work with your talent acquisition teams to get everything finalized.

But then, you’re asked to help determine the compensation range. How do you know what’s competitive? And in a market that’s constantly changing, what compensation range makes sense for today’s job market? 

In this post, you’ll learn about compensation or salary ranges. Whether you’re an employee or an employer, learn how to establish a competitive compensation range. And find out what factors may impact your salary.

What are compensation or salary ranges?

First, let’s understand what we mean by compensation ranges (or salary ranges). 

Employers and employees alike use compensation or salary ranges. It’s important for both job seekers and hiring managers to understand what goes into a compensation range. It’s also important to understand how to determine a salary range, what factors will impact a salary range, and what tools are at your disposal. 

How do you establish a compensation range? 

Compensation is a critical component of any benefits package. For hiring managers, it’s important to include competitive and fair compensation. For employees, it’s critical to make sure you’re being fairly and well compensated for your skills, contributions, and work. Let’s talk about how to establish a compensation range. 

For employers (or hiring managers) 

If you’re in human resources, you’re probably deeply embedded in everything that has to do with pay ranges and pay equity. Especially in a fast-changing market, it’s important to stay on top of market data to stay competitive.

But if you're a hiring manager, you might need some guidance on how to approach compensation and pay. Let's say you're ready to move forward with two new job postings. But before you can post them on a job board, you need to finalize salaries.  

Here are four things you can do to help establish a competitive salary range that’ll attract (and retain) top talent. 

• Do your homework. First step: research. You need to conduct market research. Try to understand what competitors are paying for comparable positions or roles in their companies. If you have connections with other colleagues at other companies, consider asking about their pay rates. 
  
  Make sure you’re evaluating companies and roles by industry, location, background and/or experience requirements, and more. For example, an old colleague may work for a small marketing firm in the Midwest. It’s likely that your large corporate company in the Bay Area is going to pay significantly more for a similar role. Start with some research around what the benchmark looks like for the open positions. 

• Determine how pay ranges fit into your compensation philosophy. Salaries are how employees are able to put food on the table, send their kids to school, pay their mortgage or rent, and overall live a fulfilling life. But many HR professionals in today’s world consider compensation and salary as a piece of a larger “total rewards” pie.
  
  For example, does your company offer stock and equity options? What sort of employee benefits and well-being programs do you have in place? What sort of retirement packages do you offer? Does your company reimburse employees for things like fitness programs?
  
  Determine how salary ranges fit into your larger compensation philosophy. This will help to establish a wider strategy on how you approach pay. 
• Assess your budget. You’re probably going to want to call in your finance friends to help with this, too. Every team and department has a set budget for new employees and salaries. For example, let’s say you have $300,000 for two new job postings.
  
  One position is a leadership role, which requires 15-20 years of experience. The other is an entry-level coordinator position. After doing some market research, let’s say you’ve determined that the coordinator position base salary falls anywhere between $50,000 to $90,000. 
  
  That leaves roughly $210,000 at a maximum for your other more experienced position. Is that competitive? Is that going to be sufficient to attract (and retain) a top leader for the role? If the answer is no, you might want to re-evaluate the salary range for your other position. Lean on the folks in finance to help guide you as you navigate your budget.  
• Set a salary range. Once you’ve figured out the job classifications, set the compensation range. You’ll typically want to outline high, medium, and low points on the range. For example, what’s your maximum salary for the role? What’s the midpoint? What’s the starting salary? 

Consider some ways you can implement these strategies into your pay practices at your organization. 

For employees 

Let’s face it: it’s not easy to figure out what salary range to ask for. So when it comes to establishing a salary that compensates you fairly and equitably, and will keep you happy at your new job, it’s not easy. 

Here are four things to keep in mind when establishing your compensation range in your job search. 

• Do your homework. We’ll talk more about tools you can use (like salary calculators) to do your own market research in the next section. But generally speaking, do your research on what’s typical for the position at hand. 
• Ask the recruiter about the budget for the role. Every role has a budget. If you’re interviewing for a position and are asked for your salary requirements, it’s fair to ask what salary range is available for the role. Of course, make sure you’re asking respectfully and express your interest in all aspects of the role, not just salary.   

• Know your worth. When I left teaching, I had no idea what to ask for in terms of salary from potential employers. Teachers are notoriously paid much lower than other professionals. So, for me, when I switched to the corporate world, I felt like a fish out of water.
  
  As a result, I interviewed for roles that I later learned were subpar when it came to salary. It took some guidance from a mentor to help me understand what my worth was in the job market. I often think about how much better off I would’ve been if I had a coach at that stage in my career. 
• Work with a coach. You can work with your coach to help determine your desired salary range. Your coach will be able to help guide you to research and thoughtfully evaluate your background and experience. 

4 tools to help compare salary ranges 

If you're a job seeker or an employee, it's important to understand salary ranges. There are a few different situations that may warrant a close examination of your salary.

For starters, you might be up for a merit increase at your current company. But on top of a merit increase, you're wondering if you also need a market adjustment or some other type of salary increase. You might also be in salary negotiations with a potential employer. Or, you might be simply looking at job descriptions and wondering if the starting salary is competitive for the cost of living. 

We’ve compiled a list of four tools to help compare salary ranges. 

• Payscale. A software with personalized support and information, Payscale can be helpful for market research. 

• Glassdoor. Glassdoor has a salary calculator (and conducts regular salary surveys) to help assess compensation ranges. 

• Salary.com. Similar to Glassdoor, Salary.com also has a salary calculator to help assess compensation and salary ranges. 
• The Bureau of Labor Statistics. If you’re in the US, the Bureau of Labor Statistics has a wealth of information around compensation and salaries. 

4 factors that impact your salary range 

There are a lot of different factors that impact salary ranges. Here are four common factors (and some that you might’ve experienced even in just the last couple of years). 

The economy 

We’re seeing budgets tighten right now as inflation (and gas prices) continue to go up. The health of the economy is a big factor when it comes to salary and compensation ranges. As the economy fluctuates, so often do salary ranges. 

Global crises 

We’ve all lived through global crises, most notably the COVID-19 pandemic. As crises strike, it’s common that they have a ripple effect across the economy. This means things like salaries and job opportunities are also impacted. 

Geographic location 

Cost of living varies greatly. Organizations most often take geographic location into account when determining salary ranges. For example, a software engineer in New York City or San Francisco is likely going to make more than a software engineer in Dayton, Ohio. 

Industry 

Industry shows up as a factor when it comes to determining a salary range. Software and technology will likely have a very different salary range than retail or hospitality. How you negotiate will depend on industry as much as any other factor.

Get smart about your salary 

Whether you’re a job seeker or an employer, it’s important to understand salaries. Job titles can only say so much. Make sure you’re doing your due diligence to fully understand the market and your worth.

And regardless of whether you’re an employer or employee, coaching can help. With BetterUp, you can lean on your coach as a guide to help navigate things like job offers, salary negotiations, and more.