What should you be getting paid?
It’s a tough question to answer. From the dreaded job application question about your preferred salary to annual or biannual salary reviews, however, you’ll have to assign a dollar value to your work.
Too high and you risk losing everything; too low and you risk underselling yourself. How do you know what’s right?
Working in HR, you’re in the position to make sure all of your people are being compensated fairly and equitably. Understanding each employee’s salary range penetration will help you do that.
- What salary range penetration means
- How salary range penetration is connected to diversity and inclusion
What does salary range penetration mean?
Every job description in your organization should come with an attached salary band—a range of salaries appropriate for the role. While there may be occasional deviations from this range for exceptional candidates, this assigned band is the standard pay for this position.
This range should stick with your hires throughout their duration of employment in this position. Using that assigned range, you can calculate their salary range penetration—meaning, how far they are into their range.
This is one of the trickier metrics to calculate. The formula for salary range penetration is (salary minus range minimum) / (range maximum minus range minimum) = range penetration.
Let’s say we’re talking about Alicia, who’s on track to get a raise in the next quarter. Go Alicia! Her position’s salary range is $90,000-$115,000, and she’s being paid $108,000.
(108,000 – 90,000) / (115,000 – 90,000) = .72, or 72%. This means that Alicia is 72% percent into her salary range, and has 28% left to go until she needs to have her position, or range, re-examined.
How salary range penetration is connected to diversity and inclusion
Women in the United States make, on average, 81 cents to the man’s dollar., leading to a lifetime earning loss of nearly one million dollars.
While many are quick to say that’s, at least partially, because women don’t ask for enough, but that’s not the case. Men and women ask for raises at about the same rate, and women even ask for slightly more money than men (31% and 29%, respectively), but not only are women less likely to receive raises—they’re more likely to be penalized for asking.
You can often spot pay gaps by examining differences in salary range penetration rates. By conducting regular compensation audits, you’ll be able to compare compensation for employees in similar roles with similar amounts of experience. If you’re seeing that women, BIPOC, LGBTQ, or older employees have lower penetration rates than their peers, then you’ll know there’s a compensation equity problem in your organization.
Recommended For Further Reading
Salary range penetration: a metric that really matters
Salary range penetration is a key indicator of pay gaps, promotions, and equity in your organization. By tracking this important metric, you’ll know how to effectively reward and compensate your people—an important part of any retention strategy.