What Is Broadbanding in Compensation?

What Is Broadbanding?

Broadbanding is a compensation structure that consolidates multiple narrow salary grades into fewer, wider pay bands. Instead of maintaining 15–20+ traditional salary grades with small ranges (typically 20–40% spread from minimum to maximum), broadbanding creates 4–8 broad bands with much wider ranges (often 80–150% spread or more).

Broadbanding emerged in the 1980s–1990s as organizations flattened hierarchies and sought more flexible compensation systems supporting lateral career development, skill-based growth, and faster adaptation to market changes. It reduces administrative complexity while giving managers greater discretion in pay decisions within established ranges.

Quick Answer

Broadbanding consolidates 15–20+ traditional salary grades into 4–8 wider pay bands with ranges of 80–150%+ (vs. 20–40% for traditional grades). It supports lateral mobility, simplifies administration, and provides flexibility for skill-based pay, but requires strong controls to prevent pay compression and inequity.

According to research from WorldatWork, approximately 30% of U.S. organizations use some form of broadbanding, with higher adoption in technology (45%), professional services (40%), and organizations with flat structures or project-based work.

How Does Broadbanding Work?

Traditional vs. Broadbanding Structure

Think of traditional salary structures like a ladder with many narrow rungs. You have 15–25 salary grades, each with a tight 20–40% spread from bottom to top. Overlap between grades is minimal (10–20%), which means you need a promotion to get a meaningful raise. Lateral moves? Usually a pay cut.

Example traditional structure:

• Grade 10: $50,000–$60,000 (20% range)
• Grade 11: $55,000–$66,000
• Grade 12: $60,500–$72,600

Broadbanding collapses that ladder into just 4–8 wide platforms. Each band has an 80–150%+ spread—massive overlap between levels. You can move sideways to develop skills without changing pay, and there’s room to grow significantly within your current role.

Example broadbanding structure:

• Band 1 (Individual Contributors): $35,000–$75,000 (114% range)
• Band 2 (Senior ICs/Team Leads): $60,000–$120,000 (100% range)
• Band 3 (Managers): $90,000–$180,000
• Band 4 (Senior Leaders): $140,000–$280,000

Pay Progression Within Bands

Organizations use market-based zones (dividing bands into entry, proficient, expert aligned with percentiles), skill-based progression (tied to competency development), performance-based increases, or manager discretion within established limits.

Benefits of Broadbanding

Lateral Career Mobility

Want to try a different role to build new skills? In traditional structures, lateral moves often mean pay cuts because you’re technically moving “down” a grade. Broadbanding fixes this.

Employees can move sideways within the same band without losing pay. Organizations using broadbanding report 35–50% more lateral career moves—people actually take opportunities to grow instead of staying put out of financial fear.

Administrative Simplification

Managing 4–8 bands instead of 20+ grades makes life dramatically easier for HR teams. Less time arguing about whether a job belongs in Grade 14 or Grade 15. Fewer reclassification requests every time someone’s job changes slightly. Simpler market pricing.

The bureaucracy just melts away.

Organizational Flexibility

Broadbanding supports the way modern organizations actually work—flat structures without endless management layers, agile teams that form and reform around projects, and fast pivots when markets shift.

You don’t need to overhaul your entire compensation structure every time the business model evolves.

Employee Development

Growth without the title game.

Pay progression ties to developing capabilities, not waiting years for a promotion slot to open up. Employees can see their full earning potential within their current role, which keeps talented technical experts from fleeing to management just for the money.

This supports career progression through skill-based advancement and employee empowerment in professional development.

Challenges and Risks

Broadbanding isn’t all upside. The same flexibility that makes it powerful also creates real risks you need to manage actively.

Pay Compression and Inequity

Wide overlapping ranges mean a brand-new employee in Band 2 might earn more than a 10-year veteran in Band 1. Without strong controls, manager discretion turns into favoritism—the people managers like get raises, others don’t.

Organizations report 25–30% higher pay equity complaints without clear guidelines. You’re trading rigid structure for flexibility, but that flexibility demands discipline.

Career Development Concerns

When you remove the traditional promotion ladder, some employees feel lost. Where’s the next step? What am I working toward?

Fewer formal promotions can demotivate people who measure success by title changes. Employees develop skills and wonder why they’re still in the same band while colleagues get promoted. External job seekers struggle comparing your “Band 2” to someone else’s “Senior Analyst III.”

Budget and Cost Control

Give managers broader discretion and some will spend aggressively while others hoard budget. Wide salary ranges make forecasting labor costs much harder—when anyone in a band could be making $60K or $120K, planning gets complicated fast.

If ranges are too generous or progression guidelines too loose, costs can spiral.

Implementation Complexity

Try telling a top-of-grade employee they’re now at the bottom of their new band. Technically accurate, but it feels like a demotion.

Employees accustomed to traditional grades need careful communication to understand the change. Your HRIS system might need modifications. Change management isn’t optional here—it’s essential.

How to Implement Broadbanding Successfully

Analyze Current Structure: Review current salary structure, employee distribution, pay ranges, market alignment. Identify consolidation opportunities by grouping jobs with similar skill levels, responsibilities, or market values.

Design Band Structure: Determine number of bands (4–6 for flatter organizations; 6–8 for larger companies). Define clear criteria for each band (responsibility level, decision-making authority, required skills). Set competitive market-based ranges using market data (80–150% spread). Create optional internal zones for progression structure.

Establish Pay Progression Guidelines: Define target market percentile (50th for competent performers, 75th for top performers). Establish zone criteria (skills acquired, performance level, experience). Set merit increase parameters based on performance and position in band. Define when movement to higher band is appropriate.

Organizations using variable pay and discretionary bonus systems alongside broadbanding maintain better cost control while offering growth opportunities.

Train Managers: Ensure managers understand compensation philosophy and objectives. Clarify decision-making authority and approval requirements. Train on avoiding bias and maintaining pay equity. Provide market data, calculators, and decision support tools. Teach constructive criticism techniques for compensation conversations and support employee empowerment in career discussions.

Communicate with Employees: Share rationale for broadbanding and how it works. Show individual impact in new structure. Explain career progression without traditional promotions. Provide resources, FAQs, and opportunities for questions.

Monitor and Adjust: Regularly audit pay distribution for compression and inequity. Review band ranges annually against market data. Survey employees about understanding and fairness. Monitor compensation costs for sustainability.

Broadbanding vs. Traditional Salary Grades

When to Use Broadbanding

Good Fit: Flat organizational structures, project-based or matrix work, skill-based career paths, fast-changing industries (technology, consulting), organizations with sophisticated HR teams and well-trained managers.

Poor Fit: Highly hierarchical organizations with many management levels, weak compensation governance lacking discipline, union environments requiring precise job classifications, cost-sensitive organizations needing tight budget control, limited HR resources without compensation expertise.

The Bottom Line

Broadbanding is a compensation structure consolidating 15–20+ traditional salary grades into 4–8 wider pay bands with 80–150%+ spread (vs. 20–40% for traditional grades). It emerged supporting flatter structures, lateral career development, and compensation flexibility.

Benefits include lateral mobility without pay cuts (35–50% more lateral moves), administrative simplification, flexibility supporting flat structures and project-based work, and skill-based growth opportunities. Approximately 30% of U.S. organizations use broadbanding, with higher adoption in technology (45%) and professional services (40%).

Challenges include pay compression and inequity risk (25–30% higher equity complaints without controls), reduced promotion opportunities, budget control difficulty, and implementation complexity requiring change management.

Implement successfully by analyzing current structure, designing 4–8 bands with competitive market-based ranges, establishing clear pay progression guidelines using zones or skill-based criteria, training managers on equitable decision-making, communicating transparently about career paths, and monitoring pay equity and market competitiveness regularly.

Try ShiftFlow’s workforce management tools to track skill development, manage performance reviews, and support compensation planning within broadband structures.

Sources

• WorldatWork – Compensation Research
• Society for Human Resource Management – Compensation Strategies
• U.S. Bureau of Labor Statistics – Occupational Wages

Further Reading

• Variable Pay Systems – Complementing broadbanding with performance incentives
• Discretionary Bonus Programs – Flexible reward structures
• Employee Empowerment – Supporting skill-based development
• Career Progression – Career development in flat structures
• Achievement Culture – Balancing performance and pay structures

Frequently Asked Questions

What is broadbanding?

Broadbanding is a compensation structure consolidating multiple narrow salary grades into fewer, wider pay bands (typically 4–8 vs. 15–20+ traditional grades) with 80–150%+ range spread. It increases flexibility for lateral movement, skill-based pay, and role changes without formal promotions.

What are the benefits of broadbanding?

Benefits include lateral mobility without pay cuts, simplified administration (fewer grades), flexibility for skill development and pay adjustments, support for flat structures, reduced promotion obsession, and greater manager discretion in rewarding performance.

What are the challenges of broadbanding?

Challenges include pay compression risk from wide overlapping ranges, potential pay inequity without clear guidelines, reduced promotion opportunities, manager bias in decisions, budget control difficulty, and complexity explaining structure to employees accustomed to traditional grades.

How do you implement broadbanding?

Implement by analyzing current salary structure, consolidating jobs into 4–8 bands based on skill/responsibility level, setting competitive market-based ranges (80–150% spread), establishing pay progression guidelines (zones, skill-based, performance-based), training managers on equitable decisions, and communicating transparently.

How wide should broadbands be?

Most broadbands have 80–150% spread from minimum to maximum, though some use even wider ranges (200%+) for senior leadership bands. Width depends on organizational structure (flatter = wider), desired flexibility, and ability to manage pay equity within ranges.