Compensation - Broadbanding

Broadbanding Defined

Broadbanding is a job grading structure that falls between using spot salaries vs. many job grades to determine what to pay particular positions and incumbents within those positions. While broadbanding gives the organization using it some broad job classifications, it does not have as many distinct job grades as traditional salary structures do. Thus, broadbanding reduces the emphasis on ‘status’ or hierarchy and places more of an emphasis on lateral job movement within the company. In a broadbanding structure an employee can be more easily rewarded for lateral movement or skills development, whereas in traditional multiple grade salary structures pay progression happens primarily via job promotion. In this way, broadbanding is a more flexible pay system. This flexibility, however, can lead to internal pay relativity problems as there isn’t as much control over salary progression as there would be within a traditional multi-level grading structure.

Selection of Broadbanding

Broadbanding works better for some organizations than others. Hierarchical and/or risk averse companies with a preference for well defined policies and procedures would be better served by a traditional multi-grade structure. Flat organizations that are flexible, have a higher tolerance for ambiguity, and encourage lateral or cross functional movement would be good candidates for broadbanding.

Broadbanding in a US Government Contracting Enviornment

Is broadbanding an acceptable pay structure for US Government Contractors? It depends on the type of products and services that are being delivered to the US Government, and the procurement methods utilized to acquire those products or services. For instance, the acquisition of products through competitive and commercial practices ensures a fair and reasonable price to the government through competitive and commercial practices. However, for flexibly priced work such as cost type or time and material type contracts, or sole fixed price contracts broadbanding offers significant challenges.