As organisations face increasing demands for fairness, transparency, and alignment between pay and purpose, how pay structures are designed has never been more important.
The CIPD defines a pay structure as “a collection of pay grades, levels or bands, linking related jobs within a hierarchy or series, that provides a framework for the implementation of reward strategies and policies within an organisation.”
However, today’s pay structures must go beyond this. They should:
- Align with organisational goals and culture
- Support fairness, transparency, and equity, especially under evolving regulations such as the EU Pay Transparency Directive
- Help employees understand how pay is managed and how they can progress
- Contribute meaningfully to Employee Value Proposition (EVP) to attract, retain, and motivate staff
The best structure balances financial sustainability with the real – and perceived – needs of your workforce.
Types of Pay Structures
There is no one-size-fits-all approach. The best structure for your organisation depends on:
- Sector and regulatory environment
- Your reward strategy (e.g. focus on loyalty, contribution, or performance)
- Organisation size, complexity, and roles
- Maturity of your HR systems and processes
The following are typical pay arrangements found in the UK but are equally applicable for EU Pay Transparency compliance and global pay frameworks. Employers can use one type or a combination of one or more when developing their own pay arrangements and structures.
Spot rates or ranges
Spot rates assign a fixed rate (hourly, weekly or annual) to a role and are common in frontline roles where market rates are well known, or executive positions requiring bespoke packages.
In organisations where pay has grown organically – or where negotiation happens on a case-by-case basis – spot salaries can result in inconsistent outcomes and equal pay risks. Without a formal structure, it’s difficult to ensure internal equity or transparency.
In contrast, spot ranges add flexibility by attaching a salary range to a role, shaped by factors like experience, skills development, performance, and benchmarking. While preferred by employees for their growth potential, they can increase costs for employers.
In 2025, many organisations are replacing spot rates with more structured models to meet rising transparency standards.
Narrow-graded pay structures (pay spines)
Common in the public sector, these structures include many narrow grades (typically 10+), with jobs of equivalent worth grouped together into grades, often tied to service increments.
An advantage is that they provide predictability for employees. However, they can lead to ‘grade drift’ (jobs being evaluated more highly than justified to give greater pay progression), and demand for benchmarking as staff quickly hit pay ceilings.
Examples include NJC scales and local authority spinal points.
Broad grades or broadbanding
Broad grades group comparable jobs into fewer, wider bands (typically 6–9), allowing more room for pay progression and reducing ‘grade drift’.
Broadbanding condenses this further (4–5 bands) to accommodate a broader spectrum of roles and performance levels, offering agility and pay flexibility – particularly useful in evolving or performance-driven organisations.
However, this model requires clear governance. Without defined rules, pay disparities can widen, which is increasingly risky in a transparency-focused environment.
Job or career families
This structure groups jobs by function (e.g. IT, HR, operations), with separate pay and progression pathways for each. It can sit alongside narrow or broad pay structures.
It’s helpful in talent-scarce markets where specialist roles command differentiated pay – but employers must justify this based on job evaluation and defensible market data.
Career families add progression tracks across functions, encouraging lateral movement and development. The rationale for pay differences between families must always be clear, fair, and well-communicated.
Options for Pay Progression
Regardless of structure, progression must be consistent, transparent, and defensible.
Common options include:
- Time-based (e.g. annual increments)
- Performance-based (individual, team, or company performance)
- Skill/competency-based
- Market or inflation-linked adjustments
In settings with limited budget, bonus ‘pots’ or profit-sharing may supplement base pay. But in all cases, equitable application is essential to maintain trust and legal compliance.
Does Pay Really Motivate?
Pay alone doesn’t drive high performance – but unfair pay demotivates.
In 2025, we know that:
- Employees value purpose, flexibility, and growth as much as competitive pay
- Transparent structures build trust and reduce disengagement
- A strong EVP – encompassing pay, benefits, culture, and values – is critical for talent attraction and retention
In lower-paid roles, pay structure matters even more. With rising minimum wages and tight margins, it’s crucial to reward progression while maintaining pay differentials – particularly between frontline and supervisory roles.
The greatest demotivator? Unfair internal relativities. When employees see others in similar roles earning more without justification, dissatisfaction skyrockets. Research confirms that perceived injustice drives disengagement. Transparency and consistency are your safeguards here.
Choosing the Right Pay Structure
Choosing the right model requires a strategic approach. Ask:
- Does our current structure support our goals, culture, and EVP?
- Can we defend our approach to transparency, fairness, and equal pay?
- Do employees understand how they can grow – and how their pay is determined?
- Are we compliant with evolving regulation, and do we reflect market reality?
Even with a well-established pay structure in place, regular review is essential to ensure continued alignment with shifting economic conditions, regulatory requirements, and workforce expectations. If existing arrangements lack the flexibility to adapt, alternative models should be explored.
Engaging expert advice can help you design and implement a pay structure that not only meets organisational needs, but also supports employee engagement, builds trust, and positions your business for a future defined by greater transparency and accountability.
