What is a salary range, and how does it work?

During recruiting, one thing is certain: Salary transparency always pays off.

Every business wants to recruit dedicated team members who are passionate about their work. But passion alone won’t bring in the best candidates—potential employees want to know how much they’ll be compensated.

That’s why clear and competitive salary ranges are a cornerstone of any recruiting strategy. Here, we will uncover what a salary range is and explain how they’re established.

Defining salary range

A salary range refers to the minimum and maximum pay an employer is willing to offer or an employee is willing to receive for a specific job or position. If a company advertises a salary range of $80,000–$100,000, it is willing to negotiate a salary between those numbers.

Some regions have enacted pay transparency laws requiring employers to include a pay range on all job postings. This ensures pay equity, clarity, and fairness. The transparency helps candidates quickly assess whether a company’s compensation model aligns with their expectations and long-term career goals. 

Salary ranges are similar to salary bands, which define pay ranges for specific job levels within an organization.

Salary range examples

An entry-level marketing assistant may expect to earn between $65,000 and $75,000, whereas a level-four marketing executive is eligible for a higher salary band between $110,000 and $140,000.

Defining precise salary ranges and bands allows companies to strategically budget payroll and attract talent that fits both their financial capabilities and organizational needs.

What do salary ranges communicate?

Salary ranges set the bounds for a potential hire’s compensation package. Where they fall within that range depends on their qualifications and experience level. To capture the attention of talented candidates, you must set up salary expectations from the beginning, including information about salary ranges, gross pay, and benefits packages in the job listing. 

Salary ranges help prospective employees understand if their desired compensation can be met so they can decide whether to proceed with the application and interview process. Posting salary ranges provides an even playing field for salary negotiation, which also reflects positively on a company’s compensation philosophy and work environment. 

Salary ranges typically include a minimum, maximum, and midpoint salary. These clearly defined total compensation ranges manage prospective employees’ expectations. Salary ranges are normally disclosed within job postings but are also commonly discussed during the interview process.

Human resources and hiring managers leverage market data and industry benchmarks to develop competitive salaries that appeal to top talent and support the company’s financial health.

Factors that impact salary ranges

Salary ranges aren’t pulled out of thin air. The following factors influence decisions about employee salaries:

• Experience: The level of experience and quality of a job seeker’s references significantly influence where they fall within a salary range. More experienced candidates with strong resumes will likely land higher on the pay scale. 
• Skill set: Demonstrable hard and soft skills that fulfill the job description determine how much training and onboarding will be required. Candidates with highly specialized skills or advanced degrees may adjust more quickly to the job, giving them a leg up during negotiations.
• Job market: Salary ranges are subject to principles of supply and demand. An abundance of job seekers for a limited number of positions will keep salaries stable or lower than previous standards. This may occur when jobs are replaced by new technologies. The opposite occurs when a small pool of skilled professionals is in high demand, increasing salary packages.
• Employment situation: Unemployment rates, economic conditions, and other labor statistics are pivotal factors in the job market. When unemployment rates are low, employers may need to offer higher salaries to attract and retain experienced employees. 
• Industry: Every industry has its own minimum and maximum salaries and pay range norms based on factors such as profitability, competition, and market demand. Highly profitable sectors (e.g., finance and energy), specialized skills (e.g., engineering and medicine), or high-risk roles (e.g., underwater welding or oil rig work) demand higher hourly wages or annual salaries. 
• Cost of living: Areas with elevated cost of living typically offer higher salaries to keep employees satisfied with their purchasing power. Companies that hire remote employees may offer different regional or global compensation depending on local salary benchmarks. 
• Company health: Large, established companies with solid financials might offer higher salaries and attractive benefits packages to attract and retain top talent. The practice ensures they maintain a competitive hold on the job market. 
• Internal structures: Organizational policies like pay philosophy, internal equity considerations, and incentive-based compensation also influence salary ranges. Organizations might have formal structures for career progression and salary increases based on job level, seniority, or performance evaluations. Additionally, policies on salary negotiation, merit increases, and bonuses can impact how salaries within the organization are managed or adjusted over time. 

5 benefits of using salary ranges

Establishing salary ranges is a win-win situation for everyone. Here are five ways it will benefit your business:

Budgeting and finance

Salary ranges define clear guidelines and boundaries for payroll budgeting, enabling companies to build sustainable hiring strategies. By establishing predictable payroll expenses, organizations can better plan long-term hiring blueprints and avoid overextending budgets.

Likewise, clear compensation ranges are crucial when managing or hiring a workforce with varying pay scales. It allows hiring managers and recruiters to prioritize open job roles and accommodate different salary levels. 

Talent acquisition

Although gross pay is just one part of a compensation package (which also includes bonuses, employee benefits, and equity), it’s vital for attracting the best job applicants. Transparency and competitive compensation indicate an employer respects applicants’ time, which can attract a broader pool of qualified job seekers.

Employee retention

Consistent and fair compensation fosters employee satisfaction and loyalty. Employees who perceive their pay as equitable and aligned with their skills may be more inclined to stick with the company long-term.

Plus, salary transparency reflects positively on the company culture. It signals open communication, mutual respect, and healthy work standards, which can improve employee retention. 

Performance management

Salary ranges act as benchmarks to evaluate and reward employee performance. A company that connects pay increases to achievement cultivates a work culture of excellence. Experienced employees and new hires may feel more motivated to excel and align work to larger organizational goals if they know their efforts will be recognized and monetarily rewarded.

Compliance

Employee compensation must adhere to local labor laws and regulations. Clearly defining salary ranges ensures that HR and hiring managers comply with minimum wage rules, overtime regulations, pay equity laws, and other relevant legislation. Compliance mitigates the risk of legal battles and government penalties.

Compliance and transparency also demonstrate a commitment to ethical business practices, enhancing trust and loyalty among employees and stakeholders. They don’t just protect an organization’s legal interests—they support an ethical and fair work environment.

Elevate your compensation strategy

A comprehensive compensation strategy is the first step to developing your dream team. Oyster is a global employment platform that helps you build compliant and competitive compensation packages for hiring talent worldwide. Oyster can pay team members’ salaries across more than 180 countries, eliminating the need to establish local entities or navigate regional pay complexities.

Discover how Oyster’s Total Rewards can help you attract top talent from the global workforce, expand into new regional markets, and scale beyond borders.