Understanding Pay Grades

To create categories for grouping employees according to pay ranges, you can define pay grades for each pay class within the organization. A pay class defines how an employee is paid, such as salaried, hourly, and so on. For example, within the pay class Salaried you can define pay grades 1 through 10. For each of these pay grades, you define a minimum, midpoint, and maximum salary amounts. These amounts define the pay range for the pay grade. For example, the pay range for pay grade 1 might be:

• Minimum equals 20,000.00 USD

• Midpoint equals 25,000.00 USD

• Maximum equals 30,000.00 USD

This means that the annual salary for an employee in pay grade 1 can be any amount between 20,000.00 USD and 30,000.00 USD.

For each pay grade, you can define a separate pay range for each of these factors:

• Locality

• Union

• Effective date

For example, if the organization has three locations in different areas of the country, you might want the pay ranges for employees in the same job to vary according to the location in which the employees work. When you create a pay grade, you can define a separate pay range for each of the three locations. This table illustrates the example:

Location	Pay Range
West Area	Minimum equals 25,000 USD Midpoint equals 30,000 USD Maximum equals 35,000 USD
Midwest Area	Minimum equals 28,000 USD Midpoint equals 33,000 USD Maximum equals 38,000 USD
East Area	Minimum equals 31,000 USD Midpoint equals 36,000 USD Maximum equals 41,000 USD

When you define pay grades by class, you create a record of the pay ranges for the organization pay grades. The system uses these pay ranges to calculate compa-ratios for the employees whom you assign to these pay grades. When you enter employee information, either an error or a warning message appears when you enter a rate that is not within the pay range for an employee pay grade. The type of message that appears depends on how you set up the system options.

If you are using pay grade steps, you can define pay grades at the same time that you define pay grade steps. You do not need to define pay grades by class to use the pay grade step table.

The Pay Grades by Class program (P082001) updates the Pay Grade/Salary Range table (F082001).