Range Spread

What range spread is

Range spread is the distance between the top and the bottom of a pay range, expressed as a proportion of the bottom. It measures how wide a single grade is in the salary structure, not where that grade stands relative to the other grades, and not where an employee stands within it.

To calculate it, subtract the range minimum from the maximum and divide the result by the minimum. Take a range with a minimum of SAR 8,000 and a maximum of SAR 12,000. The difference is SAR 4,000, and dividing it by 8,000 gives 0.5, a spread of 50%. The figures in this example, and in the examples that follow, are assumed in order to show how the quantities relate. They are not a benchmark, and they are not taken from any source.

One caution comes before anything else: the percentage is taken on the minimum, not on the midpoint and not on the maximum. Dividing the same SAR 4,000 by the midpoint of the range gives 40%, and dividing it by the maximum gives 33.3%, for one and the same range. A spread figure quoted without its denominator cannot be compared with anything.

Range spread, the midpoint, the minimum and the maximum are linked

The midpoint of the range in the example is SAR 10,000. The midpoint is not a figure independent of the spread, because the two are tied by a fixed relationship. The minimum equals the midpoint divided by one plus half the spread: SAR 10,000 divided by 1.25 gives SAR 8,000, the minimum. The maximum equals the minimum multiplied by one plus the spread: 8,000 times 1.5 gives SAR 12,000.

It follows that an organisation does not decide three figures for each grade. It decides two, the midpoint and the spread, and the two limits come out of them. An organisation that sets all three separately builds a table that can contradict itself, because a midpoint that does not sit halfway between its limits makes every measurement built on it misleading.

Range spread sets the span of the compa ratio

Where employees sit in their ranges is measured by the compa ratio, which is pay divided by the range midpoint. Within a range whose spread is 50%, the span of that ratio is fixed in advance: 0.80 at the minimum and 1.20 at the maximum.

If the spread narrows to 25%, the span runs from 0.89 to 1.11; at 40% it runs from 0.83 to 1.17. A compa ratio of 1.15 therefore describes, in the 50% range, an employee who has not yet reached the ceiling, and in the 25% range an employee who has passed it. A compa ratio taken without knowing the spread of its range gives an incomplete picture, and that incomplete picture can arise when compa ratios for grades with different spreads are combined in one report.

Overlap between two grades

A grade does not stand alone. Between it and the grade above sits a second figure, midpoint progression: how much the midpoint of the higher grade exceeds the midpoint of the one below. Overlap results from the two figures together.

Take the range above and a second grade with the same 50% spread and a midpoint progression of 15%. Its midpoint is SAR 11,500 and its limits are SAR 9,200 and SAR 13,800. The zone shared by the two grades runs from 9,200 to 12,000, a width of SAR 2,800, which is 70% of the width of the first grade.

Raise the progression to 30% and keep the spread unchanged. The second grade’s midpoint becomes SAR 13,000 and its limits SAR 10,400 and SAR 15,600, so the shared zone narrows to SAR 1,600, or 40% of the width of the first.

The exact rule: with equal range spreads, overlap disappears when progression equals spread

Raise the progression to 50%, the same value as the spread. The second grade’s midpoint becomes SAR 15,000 and its minimum SAR 12,000, exactly the maximum of the first grade, and the overlap disappears completely.

This is not a coincidence of these figures. Whenever the progression equals the spread and both grades have the same spread, the minimum of the higher grade equals the maximum of the lower one, whatever the figures. Overlap exists as long as the progression is below the spread and disappears when the two are equal. When the progression exceeds the spread, a gap opens between the grades in which no pay falls.

For two grades with equal spreads, this rule makes argument over overlap unnecessary. An organisation that wants overlap sets the progression below the spread by as much as it wants, and one that wants a complete separation between the two grades sets them equal. If the two grades differ in spread, equality is not enough, and the minimum of the higher grade has to be calculated from its midpoint and its spread before the progression is approved. Setting the two figures independently and noticing the overlap after the table is built is a late discovery of a decision that had already been made. Midpoint progression is decided together with the spread, and the definition sets no value for it.

How many years it takes to cross the range

Range spread also shows how long an employee can stay in a grade before reaching its ceiling. Someone who starts at the minimum and receives 3% a year needs 14 years in a range with a 50% spread: after 13 years their pay is SAR 11,748.27, still below the ceiling, and after 14 it is SAR 12,100.72, above it.

In a range with the same minimum and a spread of 25%, which puts the ceiling at SAR 10,000, the same employee needs 8 years: after seven, pay is SAR 9,838.99, and after eight, SAR 10,134.16.

So the spread decides when red circled pay, meaning a salary frozen above the grade maximum, becomes a live question in an employee’s file. A narrow range in an organisation where employees stay a long time produces, after some years, a number of such cases rather than one, and that effect can be foreseen from the spread years before it happens.

Entry position uses up the range before work begins

The calculation above assumes entry at the minimum, which gives the longest time to the ceiling. Where an employee enters the range is itself a decision, and it uses up part of the range before the employee has worked a single day:

• An employee who joins at SAR 8,000 reaches the ceiling in the fourteenth year, as shown above.
• One who joins at SAR 9,000 reaches it in the tenth year: after nine years pay is SAR 11,742.96, and after ten SAR 12,095.25.
• One who joins at the midpoint, SAR 10,000, reaches it in the seventh year: after six years pay is SAR 11,940.52, and after seven SAR 12,298.74.

A starting offer SAR 2,000 higher therefore does not cost the organisation that amount alone. It costs seven of the years the range had room for. That price does not appear in the year the decision is taken, but years later, as an employee who has reached the ceiling with no promotion available. What entry positions do to the pay bill across the organisation as a whole is examined under wage drift.

This is why range spread is examined alongside the policy on entry positions. A wide range whose middle is filled by new hires is, in practice, a narrow range, whatever the table says. An employee who joins below the minimum is a separate matter: green circled pay.

What each kind of range spread buys

• A wide spread buys a longer period in which staying and growing within the same job is rewarded without a promotion. It also buys flexibility in hiring, because the range can accommodate candidates with different levels of experience.
• A narrow spread buys cost discipline and clarity about what the grade means, because the people in it are necessarily close together. It also makes promotion the only route to a meaningful increase.

Each has a price in the opposite direction. A wide spread allows two colleagues in the same grade to be 50% apart, a gap that needs an explanation in how employees are placed within the grade. A narrow spread brings people to their ceilings quickly, turning pressure on pay into pressure on promotions.

There is no general figure for the correct range spread, because spread follows the nature of the jobs in the grade, how long people stay in them and the state of the market for them.

Range spread is also examined alongside the number of grades in the scale as a whole, a choice discussed under job classification. An organisation with many grades of narrow spread moves pressure on pay onto promotions, and one with few wide grades moves it onto placement decisions within the grade. Neither choice removes that pressure; it only moves it to the point the organisation has chosen, and that point is better chosen deliberately. How the number of grades shows up in the count of promotions is covered under career path ratio.

How range spread differs from the compa ratio, broadbanding and midpoint progression

• The compa ratio. That ratio describes where an employee stands within a range, while range spread describes how wide the range is. The first changes as the employee’s pay changes; the second changes only when the table changes.
• Broadbanding. This is a decision to merge grades into a single level, so that there are fewer of them and each is wider. It changes the number of grades as well as their spread. Range spread is a description of an existing grade, whatever the number of grades.
• The gap between one grade and the next. That is midpoint progression, a different figure, and as shown above, overlap results from the two together, not from either alone.

What distorts the measurement of range spread

• Different denominators across grades. A table in which the spread of some grades is calculated on the minimum and of others on the midpoint cannot be compared internally at all.
• Calculating spread on pay that includes items tied to the circumstances of the work. Ranges are built on the same pay base on which positions within them are measured. Adding items that depend on the circumstances of the work makes the range look wider without making it wider in fact.
• Taking one spread for the whole organisation. Lower and upper grades can differ in spread, and a single average hides any such difference.
• Ignoring how many people are in each grade. A wide spread in a grade with two employees does not mean what it means in a grade with a hundred, because the effect of spread on cost follows headcount.

The definition of range spread states no statutory rule on how grade tables are built, and questions about the wage and its components have their own sources.

Before a range spread figure is approved

A useful test of a spread before it is approved is to calculate two things from it: the compa ratio span it will produce, and the number of years an employee takes to reach the ceiling at the rate of increase the organisation applies. If those years come out shorter than the time people stay in those jobs in the organisation, the table promises ceilings that will be reached, and how they are to be handled has to be decided now, not five years later.

Overlap with the next grade is then calculated before the progression is approved, because the rule above makes it known in advance. As long as the progression is below the spread and both grades share the same spread, the overlap is there in an amount that can be calculated. It is not a surprise that appears at the first promotion that leaves pay unchanged.

This is an explanation of the concept, not legal advice.

Related terms

• Job Classification
• Career Path Ratio
• Wage Drift
• Geographic Pay Differentials