How to Design a Salary Structure From Scratch

At 97 employees, a product company in Nairobi discovered its pay system was actually 97 individual negotiations. Two senior designers doing similar work were USD 22,000 apart. A newly hired sales manager earned more than the head of support. Managers asked HR for "market rate" and HR had no shared job levels, no midpoint, and no rule for exceptions.

That is when you need a salary structure.

A salary structure is the architecture behind pay decisions. It tells you how jobs are grouped, what market you compete in, where each role sits, how wide each range is, and how employees move through the range over time.

Start with job evaluation

Before you price jobs, decide how they compare internally. Job evaluation is the process of measuring role size: scope, complexity, decision authority, knowledge, impact, people leadership, and risk.

Common approaches:

• Hay-style factor evaluation: rigorous, useful for larger organizations, slower to run.
• Points-based evaluation: assigns points to factors such as knowledge, accountability, and problem solving.
• Career architecture: levels jobs by role family, impact, autonomy, and scope.
• Simple leveling: good for companies under 150 employees if applied consistently.

For a 100-person company, use a simple five-factor model:

Score each role, not each person. The role may be Grade 7 even if the current employee is exceptional.

Build grades and bands

Pay grades group jobs of similar internal value. Salary bands define minimum, midpoint, and maximum pay for each grade.

A simple 12-grade structure for a 100-person company might look like:

• Grades 1-3: entry and administrative support.
• Grades 4-6: experienced individual contributors.
• Grades 7-8: senior specialists and first-line managers.
• Grades 9-10: principal specialists and department heads.
• Grades 11-12: executives.

Range spread is the distance from minimum to maximum. A practical starting point:

• Entry roles: 30% to 40% spread.
• Professional individual contributors: about +/-20% from midpoint.
• Managers: about +/-30% from midpoint.
• Executives: wider ranges, often with more variable pay.

Choose your market position

Market position answers: do you lead, match, or lag the market?

You do not need one answer for every job. A 120-person SaaS company might:

• Target the 60th percentile for senior engineering.
• Match the 50th percentile for operations.
• Target the 40th to 50th percentile for roles with deep local supply.
• Use equity, flexibility, or learning budget to strengthen the offer where cash is limited.

Use benchmark sources responsibly: Radford, Mercer, WTW, Payscale, Levels.fyi, Carta, local salary surveys, recruiter data, and trusted peer networks. Free sources are useful for directional checks, but paid surveys usually have better job matching and methodology.

Work through a 100-person example

Imagine a 100-person company with 12 grades. HR prices Grade 6 professional roles at a USD 60,000 midpoint in the main labor market.

If the range spread is +/-20% from midpoint:

• Minimum: USD 48,000.
• Midpoint: USD 60,000.
• Maximum: USD 72,000.

Grade 7 might have a midpoint 15% higher:

• Midpoint: USD 69,000.
• Range: USD 55,200 to USD 82,800.

This creates overlap, which is normal. A strong Grade 6 employee can earn more than a new Grade 7 employee. The difference is role size, not automatic pay.

Handle geography deliberately

Geographic pay has three common models:

• Local market pay: pay based on employee location.
• Zone-based pay: group cities or countries into tiers.
• National or global pay: one range regardless of location.

Local market pay controls cost but can feel unfair in remote teams. National pay is simple and attractive but can overpay in some markets and underpay in expensive ones. Zone-based pay is often the practical middle.

Maintain ranges every year

A salary structure decays if you do not maintain it. Market rates shift, inflation changes expectations, and hot roles move faster.

Annual maintenance should include:

• Market data refresh.
• Range movement recommendations.
• Employee compa-ratio review.
• Pay equity review.
• Promotion and leveling audit.
• Exception report.
• Budget request for range corrections.

Key takeaways

• Salary structures start with role evaluation, not market data alone.
• Grades group jobs by internal value; bands define pay range.
• Use market percentiles intentionally by job family.
• Range overlap is normal and healthy.
• Geography needs a clear philosophy before remote hiring scales.
• Review ranges annually and connect the process to pay equity.