When your company was starting out, you probably made your compensation decisions based on your best judgement for each individual role.
But as you scale, this gets messy fast.
Around the 100 to 200 employee mark, most organizations start to think about implementing a more structured and mature compensation process.
The first step in the journey toward better pay decisions is to determine the compensation philosophy that guides your decision-making.
Then, it’s time to execute on that vision. You start by building a Job Leveling framework.
A Job Level is a consistent set of expectations for what an employee at that level looks like across your company.
A Job Leveling framework is a way of systematically grouping jobs together and ranking them into a hierarchy.
The purpose of the framework is to allow HR or People teams to evaluate all the jobs that have similar characteristics together, figure out the market rate of pay for comparable roles, and determine how your company should pay your employees.
Without Job Levels, there is no consistency
As a company scales, failing to have a good Job Leveling framework results in role confusion and poorly-defined responsibilities.
This ambiguity could mean that people who are doing substantially similar work end up with different job titles and different pay… which means you could have a pay equity issue on your hands.
Without Job Levels, you may also struggle to grasp the big picture view of your company’s structure. Do you have enough entry-level people in the pipeline to grow as your company’s needs grow? Has your organization become top-heavy with too many directors and senior managers?
Job Levels allow you to more easily review any talent gaps in your organization.
Job Leveling is “one of the most persistent and stubborn problems in many organizations,” according to SHRM, and needs to be addressed because “inaccurately evaluated jobs lead to pay dissatisfaction and wasted payroll dollars”.
How to create Job Levels
Your Job Levels will be unique to your organization’s specific needs.
A smaller company might have a flatter structure with roles bucketed into a few broad categories, such as: Junior, Intermediate, and Senior.
As you scale, you can expand out this framework to allow more differentiation and progression between Levels. This is often represented by numbers, such as L1, L2, L3, and so on.
For example: someone in an entry-level role, represented by the Job Level 1 or L1, may:
- have less than 2 years of experience
- be expected to work on simple assignments
- need detailed instruction and lots of supervision
Someone at the next Job Level, L2, has more experience, takes more complex assignments, and is expected to have more ownership and autonomy.
Some companies use “career tracks” to break out Job Levels into multiple parallel paths. The most typical structure is where you have a career track for individual contributors (ICs) and another track for people managers, with some overlapping Job Levels.
This is useful in fields with deep technical expertise, because it allows people to do what they do best. An excellent scientist who loves conducting research may not have the desire or skills to switch into people management, but they still need room to grow and develop.
As you can see here, an intermediate individual contributor (IC2) who is performing well and ready for a promotion can choose whether to focus on developing their own subject matter expertise (IC3) or move into people management (M1).
Career tracks give amazing individual contributors multiple paths towards career progression and increases in their compensation. It allows an individual contributor to keep growing in their career and compensation without necessarily becoming a people manager, which helps to retain them in the long-term.
Once you’ve figured out your expectations for each Job Level across the company, you can then zoom in to look at each department.
Map out your Job Functions
A Job Function (also called a Job Family) is a grouping of jobs that involve similar work and require similar training, skills, knowledge, and expertise.
Depending on your organization, Job Functions could simply map one to one to your departments, such as Sales, Marketing, and Engineering.
But they don’t have to! Your organization might choose to segment a department into multiple Job Functions. Within the Engineering department, you could have a number of Job Functions, such as Quality Assurance (QA), DevOps, and Data Science.
Or it might be more relevant to go broad and combine departments together. For example, you might choose to group the Finance, Accounting, Facilities Management, and Legal departments together into a Job Function called Finance & Operations.
Put together your Job Leveling framework
To create your framework, assign each role or job title at your company into a Job Level and Job Function, grouping similar jobs together.
You’ll end up with a systematic company-wide overview of all your roles and their hierarchy.
In this example, the company’s Content Writer and Graphic Designer roles share a similar level of responsibilities and compensation. And, knowing that they will soon be hiring a Senior Graphic Designer, they have planned ahead and slotted that role into their framework.
The number of Job Levels and Job Functions you need will vary depending on the complexity of your organization, the types and number of jobs you have, and your compensation philosophy.
The many benefits of using a Job Leveling framework
Clearly defined Job Levels have a tangible positive impact on employees, candidates, your HR team, and even your Finance department.
In the 2021 Pulse of the American Worker Survey, 80% of workers who are planning to look for a new job said they’re doing so because “they are concerned about their career growth”.
For Employees and Candidates
Job Levels illuminate a potential career path. People know what is expected in their current role, how that relates to the rest of the organization, and what they need to do to get promoted to the next Job Level. They have a clear path to increasing their compensation within your company, and know they’ll be rewarded for their growth without having to switch jobs. This sense of certainty and vision for the future boosts employee engagement and retention.
For Talent Teams
Job Levels promote a shared understanding of a role’s expectations, and therefore the skills, qualifications, and level of autonomy that an ideal candidate would bring to the role. This gives a recruiter the ability to place the right person at the right level with the right compensation. It’s common for an open role to straddle multiple Job Levels. For example: the right person for a job could be intermediate or senior, depending on the unique value they bring to your organization.
For HR and People Leaders
The process of creating a Job Leveling framework can be a powerful tool to bring clarity and cohesion to an organization. Job Levels help you benchmark jobs to the market more easily, create consistent salary ranges, and navigate through pay equity problems. But at their core, Job Levels help you ensure that you have the right mix of junior, intermediate, and senior talent to reach your organizational goals.
From a Budget Perspective
Job Levels can help your organization pay fairly and competitively, while keeping costs aligned to value. “Under conditions of uncertainty, companies tend to overpay employees” but, with a well-designed Leveling framework, compensation accurately reflects the market value of a job and the job’s value to and impact on the company.
Once you have built your Job Leveling framework, you’re well on your way to building out your compensation structure. The next step is figuring out the salary ranges (we call them Pay Bands) that you will use across your organization.
Job Levels are intended to be consistent across your organization (as they provide a shared understanding about the expectations at that level), but Pay Bands will likely vary by Job Function.
Although an L1 Engineer, L1 Salesperson, and L1 Warehouse Associate are all “entry-level” positions, they are likely compensated differently for different skills, knowledge, and expertise (and the market pay for those positions will also vary).
Together, Job Levels and Pay Bands form the basic structure of compensation at your company. By using this Job Leveling framework, you’ll be able to create a consistent and equitable compensation system that maintains fairness and scales as your company grows.