A new hire requisition lands on your desk. 

The role is approved, and the job description is ready, but one crucial question needs answering: what salary should you offer? 

Setting the right salary range isn't just about picking good numbers - it requires careful consideration of multiple factors to ensure your offer is both competitive and fair.

Whether you're an HR professional building compensation structures or a hiring manager preparing to bring on new talent, understanding how to determine salary ranges is essential. 

It helps control labor costs, ensures internal pay equity, and positions your company competitively in the market. 

Let's explore the fundamentals of salary ranges and walk through a practical approach to setting them for any position. 

What Does Salary Range Mean? 

A salary range represents the minimum and maximum base pay an organization is willing to offer for a specific position. 

For example, a Marketing Manager role might have a salary range of $80,000 to $120,000. This range is carefully determined based on the job's responsibilities, required experience, market conditions, and the organization's compensation philosophy.

Consider a salary range as your compensation framework - it guides pay decisions while maintaining fairness across your organization. While sometimes called salary bands, especially internally, ‘salary range’ or ‘pay range’ is the term most commonly used in job postings and discussions with candidates. 

This is particularly important in locations with pay transparency laws, where employers must disclose pay ranges to potential candidates.

Salary range example 

Let's look at a Talent Development Manager position at a mid-sized tech company to understand how a salary range works in practice. Note that this is a hypothetical example. 

Position: Talent Development Manager Base Salary Range: $95,000 - $135,000

Breaking this down:

• Minimum ($95,000): Starting point for candidates who meet the core requirements - someone transitioning from a senior training specialist role with 5 years of experience
• Midpoint ($115,000): Target for fully proficient performers who bring 7-8 years of experience and have successfully led learning programs
• Maximum ($135,000): Reserved for exceptional candidates or those who have grown significantly in the role - someone with 10+ years of experience who has transformed training programs and demonstrated measurable impact on employee development

This 40% range width ($40,000 spread) allows flexibility in hiring while maintaining internal equity with related positions like HR Business Partners and Learning & Development Specialists.

Factors that Directly Impact Salary Range 

When determining salary ranges, multiple factors come into play — some obvious, others more subtle. While market data provides a foundation, the interplay of various organizational and external factors shapes your final ranges. 

Understanding these factors helps you create ranges that are not only competitive but also sustainable and equitable for your organization.

Let's explore eight critical factors that directly impact how you set and adjust your salary ranges, along with real-world examples of how each factor influences compensation decisions:

Job level and complexity 

Higher-level positions with greater responsibility and complexity command wider ranges and higher midpoints.

💡Example: A Senior Software Architect role ($130,000-$190,000) has a broader range than a Junior Developer ($70,000-$90,000) because the architect role requires more profound expertise and has more impact on business outcomes.

Local market rates and cost of living 

Cost of labor in different markets directly affects the entire range, sometimes by 20-50%. 

💡Example: A Financial Analyst in San Francisco might have a range of $85,000-$120,000, while the same role in Austin might range from $65,000-$95,000 due to different market rates and living costs. 

Industry pay practices and norms 

Different industries have varying profit margins and compensation norms that influence ranges. 

💡Example: A Product Manager in fintech might see a range of $120,000-$160,000, while the same role in the non-profit sector might range from $80,000-$110,000.

Organization's budget and maturity 

Larger companies typically offer higher and wider ranges due to more complex hierarchies and bigger budgets. 

💡Example: A Marketing Director at a Fortune 500 company might see $150,000-$220,000, while a startup might offer $120,000-$170,000 but include equity compensation.

Candidate’s skills, qualifications, and certifications 

Specialized credentials or rare skill sets can push the entire range upward. 

💡Example: A Cybersecurity Engineer with CISSP certification might command a range of $130,000-$180,000, while one without might see $110,000-$150,000.

Talent supply and demand

High demand for certain roles can force ranges upward to remain competitive. 

💡Example: During a tech boom, a Data Scientist role might need to shift from $100,000-$140,000 to $120,000-$170,000 to compete for talent.

Pay equity among current employees 

Existing employee salaries influence new hire ranges to maintain fairness. 

💡Example: If your current Senior Business Analysts earn $95,000-$115,000, a new hire range of $120,000-$140,000 for the same role would create inequity and potential legal issues.

The organization's compensation philosophy 

Strategic decisions about market positioning affect all ranges. 

💡Example: A company choosing to lead the market might set their Software Engineer range at $140,000-$180,000 when the market median range is $120,000-$160,000, specifically to attract top talent.

Each factor doesn't exist in isolation - they interact and sometimes compete. For instance, a company might want to pay at the top of the market (compensation philosophy) but must balance this against its budget constraints (company size/stage). The key is weighing these factors thoughtfully to create competitive and sustainable ranges.

How to Determine Salary Range for a Particular Job Role? 

Setting a salary range isn't just about picking numbers that feel right. It's a strategic process that requires careful analysis and consideration of multiple factors. Whether establishing ranges for a new role or updating existing ones, following a structured approach helps ensure your ranges are competitive, fair, and sustainable.

Let's walk through each step of creating a salary range, from initial job analysis to final validation. While this process might seem detailed, each step builds upon the previous one to help you reach a range that works for your organization and potential candidates.

Step 1: Map essential job details and level alignment 

Before diving into numbers, you need a clear picture of what you're compensating for. Start by documenting the role's requirements, responsibilities, and where they fit in your organization. This foundation ensures you're benchmarking against truly comparable positions.

• Create a detailed job description with core responsibilities
• Define required qualifications and years of experience
• Map organizational context: This includes: 

- Current team composition and experience levels
- Existing team member salaries and their positioning in ranges
- Department structure and reporting relationships
- Growth plans and potential future roles

• Document key performance metrics and expectations
• Analyze the impact on the existing team. This includes:

- Potential salary compression with peers
- Career progression paths
- Internal equity considerations

💡Example: For a Product Marketing Manager position, specify if it's an individual contributor managing campaigns independently or a team lead overseeing junior marketers, as this distinction significantly impacts the range.

Step 2: Gather comprehensive market data from multiple sources 

Raw salary data is your starting point, but context matters. Look beyond simple averages to understand the complete market picture.

• Pull data from industry salary surveys (prioritize recent data)
• Analyze competitor job postings in your location
• Consider data from professional associations in your field
• Document salary ranges for similar roles at target companies

💡Example: When researching a software engineer role in Austin, you might find starting salaries differ by $20,000 between enterprise companies and startups, helping you position your range appropriately.

Step 3: Evaluate internal pay practices and equity considerations 

Your new range shouldn't exist in isolation. Consider how it fits within your existing compensation structure to maintain fairness and prevent compression.

• Audit current employee salaries in similar roles
• Review ranges for roles above and below this position
• Check for potential compression with supervisor salaries
• Consider the impact on future promotion opportunities
• Document any existing pay equity concerns

💡Example: If your mid-level engineers earn $110,000-$140,000, a new senior engineer range starting at $130,000 allows room for promotions while maintaining appropriate differentials.

Step 4: Calculate range parameters using market positioning 

Now, translate your research into actual numbers. Your compensation philosophy guides whether you lead, match, or lag the market.

Start with your target market position:

• Lead market: Target 65th-75th percentile
• Match market: Target 50th-60th percentile
• Lag market: Target 35th-45th percentile

Then, build your range:

• Set a midpoint at your target market position
• Calculate minimum (typically 80-85% of midpoint)
• Calculate the maximum (typically 115-120% of midpoint)

💡Example: Market data shows median (50th percentile) = $100,000 For a market-matching strategy:

• Minimum: $85,000 (85% of midpoint)
• Midpoint: $100,000
• Maximum: $115,000 (115% of midpoint)

Step 5: Test against business constraints and finalize 

The perfect range on paper needs to work in reality. Validate your range against practical considerations before finalizing.

• Compare against departmental budget allocations
• Check alignment with company-wide compensation strategy
• Verify compliance with any relevant pay equity laws
• Review against recruitment and retention goals
• Document your methodology and rationale

💡Example: If your budget can only support up to $110,000 but market data suggests a $120,000 maximum, you might need to adjust the role's scope or secure additional budget approval.

📚Note: Document your decision-making process at each step. This creates a clear audit trail and helps explain your rationale to stakeholders while ensuring consistency in approaching range-setting across roles.

Where does a Salary Range Builder Tool like Compport Fit in? 

Gone are the days of wrestling with complex spreadsheets and manual calculations to build salary ranges. Build comprehensive, market-aligned salary ranges in minutes using data-driven compensation tools like Compport. Here's how technology enhances each step of range building:

Market data blender: Multi-source benchmark integration 

Say goodbye to manual market data reconciliation. Compport lets you blend multiple salary survey sources (like Mercer and Aon) using weighted averages or highest/lowest values. You can quickly fill gaps for roles with missing market data by creating estimates based on similar positions.

Progression calculator: Level-to-level percentage jumps

Define and adjust percentage progressions between job levels with precision. For example, set a 40% jump from level 2 to level 3, then instantly see how these progressions affect your overall range structure and validate if they create realistic career paths.

Midpoint assessor: Market positioning and spread definitions

Compport allows you to set your range midpoints based on market data, then define custom spreads for the minimum to midpoint and midpoint to the maximum. Customize range spreads based on multiple parameters like country, function, or job level to align with your compensation strategy while maintaining internal equity.

Population and pay equity analyzer: Employee distribution within ranges

Instantly assess how your current employee population falls within the proposed ranges. Identify risk zones where employees sit below range minimums or above maximums, helping you spot potential compression or equity issues before they become problems.

Merit impact calculator: Increment and budget simulations 

Compport’s pay range builder connects performance ratings with proposed ranges to model different merit increase scenarios. Calculate the budget impact of your range adjustments and proposed salary increases, ensuring your ranges are both market-competitive and financially sustainable.

Ready to Set up Your Salary Ranges? 

Setting salary ranges is a strategic process that requires careful consideration of multiple factors, from market data to internal equity. While the fundamentals remain constant, the approach has evolved from manual calculations to data-driven decision-making. 

Organizations can create competitive and sustainable ranges by following a structured methodology and understanding key influencing factors, ensuring fair compensation while controlling labor costs.

Looking to streamline your salary range creation process? 

Compport's pay range builder eliminates manual calculations and rescues you from complex spreadsheets. From blending multi-source market data to simulating merit increases, our tool helps compensation professionals focus on strategy rather than calculations. 

See Compport in action 👇

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FAQs 

How do you find the salary range? 

To find a salary range, start with market data for the position's midpoint, then calculate the minimum (typically 80-85% of midpoint) and maximum (115-120% of midpoint). For example, if market data shows $100,000 as the midpoint, the range would be $85,000-$115,000. Use salary surveys, industry benchmarks, and competitor data to determine the appropriate midpoints.

What is the meaning of the basic salary range?

The basic salary range represents the span between minimum and maximum base pay (before bonuses or benefits) that an organization is willing to pay for a specific position. It helps guide pay decisions while maintaining internal equity. For example, a role might have a basic salary range of $50,000-$70,000, with exact placement depending on experience and qualifications.

How do you find the salary range?

To determine a salary range:

• Research market rates using salary surveys
• Consider internal factors like budget and existing employee pay
• Factor in location and industry standards
• Set midpoint at market rate
• Calculate minimum (80-85% of midpoint) and maximum (115-120% of midpoint)

Remember to adjust for your company's compensation philosophy (lead, match, or lag market).