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.

In 2024, Disney learned this lesson the hard way, agreeing to a $43.3 million settlement after allegedly paying female employees less than their male counterparts in similar roles—a stark reminder that poor salary range management has serious consequences.

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. 

“Employees today aren’t just comparing their salaries to their peers internally—they're benchmarking against the market. If companies don’t have well-structured salary ranges, they risk losing people not just to better pay, but to perceived unfairness.” — Krish Shankar, Ex-CHRO at Infosys

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 examples 

Let's look at a Talent Development Manager position at a mid-sized tech company to understand how a compensation 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.

Salary band vs. Salary range: What are the differences? 

The terms "salary range" and "salary band" are frequently confused in compensation management, creating inconsistency in how organizations structure and communicate pay. This confusion exists because many companies use these terms interchangeably or define them differently based on their specific compensation philosophy and HRIS systems.

Simply put, salary ranges apply to specific jobs, while salary bands group multiple jobs within broader pay categories. This distinction impacts everything from compensation strategy to employee career pathing.

Here’s a quick difference between the two 👇

In sophisticated compensation systems, salary bands and ranges often work together hierarchically:

Salary bands establish broad pay categories across the organization

Salary ranges define specific pay parameters for individual positions within those bands

For example, a company might have Band 4 (Senior Professional) spanning $90,000-$150,000, which contains multiple roles, each with their specific salary range:

• Senior Software Engineer: $110,000-$140,000
• Senior Financial Analyst: $95,000-$125,000
• Senior Marketing Manager: $100,000-$135,000

Use Salary Ranges When:

• You need precise market alignment for specific roles
• Positions require specialized skills with distinct market values
• Transparency in job-specific compensation is prioritized
• Your organization has clearly defined, distinct job descriptions

Use Salary Bands When:

• Implementing broad-based compensation frameworks
• Creating clearer career progression paths across functions
• Emphasizing internal equity over external market precision
• Supporting a flexible workplace with cross-functional movement

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 Position? 

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.

Common Mistakes When Defining Salary Ranges

Even seasoned organizations often make mistakes when establishing salary ranges, which could easily be prevented. These mistakes create administrative headaches, drive talent loss, affect employee engagement, and sometimes trigger costly legal issues. 

Did you know that in early 2025, Mastercard agreed to pay $26 million to settle a pay discrimination lawsuit filed by female, Black, and Hispanic employees who were allegedly paid less than similarly situated colleagues—a costly reminder that improper salary range management can lead to serious legal consequences.

If you can relate to any of the following mistakes while defining pay ranges, you need to act on it ASAP: 

Setting ranges too wide or too narrow

Many organizations create salary ranges with inappropriate widths—either too restrictive or excessively broad. Too narrow ranges (under 20%) limit flexibility in recognizing performance differences, while overly wide ranges (exceeding 60%) make explaining vast pay differences for similar work difficult. This typically happens when companies apply one-size-fits-all range widths across all job levels rather than adjusting the width based on role complexity and career path length.

Neglecting internal equity analysis

Organizations set new ranges exclusively based on market data without analyzing existing employee pay distribution, creating a disconnect between them and the current reality. This oversight occurs because compensation teams often work in silos, separated from HR data analysts. The result is ranges that look good on paper but create immediate compression issues, forcing painful "red circle" decisions and potentially triggering pay equity lawsuits when similar employees fall on different sides of range boundaries.

🔖Download our pay equity audit guide to learn more about pay equity analysis

Focusing on the midpoint while ignoring the range progression

Many organizations obsess over getting the midpoint right but pay little attention to how ranges progress through their job architecture. This happens because market pricing individual positions is easier than designing a coherent overall structure. Without proper progression analysis, companies create illogical salary overlaps between levels, undermining promotion value and creating confusion about career development paths.

How does a Salary Range Builder Tool like Compport Help Prevent These Mistakes? 

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:

Building effective salary ranges is challenging—it's also risky, and even small errors can create significant downstream consequences for talent attraction, retention, and compensation equity. While spreadsheets remain the default tool for many organizations, purpose-built compensation software like Compport's Pay Range Builder provides guardrails that prevent common salary range mistakes through automation, data validation, and sophisticated modeling capabilities.

Eliminates inconsistent range spreads with customizable parameters

Spreadsheet-based range building often leads to inconsistent range widths when formulas are manually applied across different job families or levels. Compport prevents this by allowing compensation professionals to set standardized range spreads that automatically adjust across the organization.

The software enables HR teams to customize minimum-to-midpoint and midpoint-to-maximum spreads with instant visual feedback. As demonstrated in client implementations, users can quickly test different scenarios (like changing a 24%/61% imbalanced spread to a more consistent 40%/40% model) and see the impact immediately, ensuring ranges remain coherent and defensible.

Maintains internal equity through level-to-level progression analysis

One of the most challenging aspects of range design is maintaining appropriate differentials between levels. Without proper progression analysis, organizations frequently create illogical jumps between tiers—for example, small differentials between early career roles but excessively large ones between senior positions.

Compport tackles this directly through its level-to-level progression tools, where users can set appropriate percentage increases between grades (such as standardizing at 40% or 45%). The system automatically recalculates all midpoints to ensure logical salary progression, preventing the compression and overlap issues that plague Excel-based approaches.

Ensures market alignment by blending multiple data sources

Relying on outdated or limited market data is a common mistake in compensation planning. Compport addresses this by allowing organizations to import and blend multiple salary survey sources simultaneously—including Mercer, Aon, and Radford—and weight them according to relevance or reliability.

The system enables sophisticated job matching for roles without direct market matches using weighted averages or highest/lowest values from similar positions. As one client demonstrated when implementing the tool for their 30,000-employee organization, this approach allows for comprehensive market coverage without the manual calculation burden of traditional spreadsheets.

Prevents "set-it-and-forget-it" syndrome with aging capabilities

Many organizations fail to regularly update their ranges, allowing them to become misaligned with market reality. Compport's aging feature automatically adjusts historical data to current values using configurable factors and timeframes—a functionality clients particularly appreciate.

For example, an organization with 18-month-old survey data can automatically age it to the present day using a 9% annual increase factor, bringing older market data to current relevance without purchasing new surveys yearly. This ensures ranges remain current even when full market analysis isn't feasible.

Provides transparent documentation through comprehensive analytics

The lack of clear methodology documentation often undermines range defensibility. Compport addresses this by automatically generating detailed analytics that explain the rationale behind each range, including:

• Pay gap analysis showing position relative to market benchmarks
• Population distribution analysis reveals how current employees fall within ranges
• Budget modeling that projects the financial impact of range adjustments

These analytics create an automatic documentation trail that strengthens decision justification while enabling compensation teams to proactively address potential compression issues before implementing new ranges.

Rather than merely automating calculations, Compport's Pay Range Builder transforms the salary range development process by embedding compensation best practices directly into the workflow. This helps organizations avoid costly mistakes while creating more strategic, data-driven pay structures.

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 spr

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).

What is a salary range example? 

A Talent Development Manager at a mid-sized tech company might have a base salary range of $95,000-$135,000, with the minimum for candidates meeting core requirements, the midpoint for fully proficient performers, and the maximum for exceptional candidates with extensive experience.

What should I answer for salary range? 

When asked about salary range, provide a well-researched range based on your experience, skills, and market value. Research industry standards, factor in your qualifications, and give a range of 15-20% spread between minimum and maximum to allow negotiation flexibility.

What is the meaning of a pay range? 

A pay range represents the minimum and maximum base pay an organization is willing to offer for a specific position, carefully determined based on job responsibilities, required experience, market conditions, and the organization's compensation philosophy.

Why do companies use salary ranges?

Companies use salary ranges to control labor costs, ensure internal pay equity, and position themselves competitively in the market. Ranges provide a structured framework for compensation decisions while maintaining fairness across the organization.

What affects your position in a salary range?

Your position within a salary range is affected by job level and complexity, market rates, industry norms, organizational budget, skills and qualifications, talent supply and demand, internal pay equity considerations, and the company's compensation philosophy.