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Understanding the Inverted Pyramid of Compensation Range Spread
Designing a fair, motivating, and strategic compensation system requires more than simply setting salaries—it involves carefully structuring pay ranges across different job levels. One common framework used in compensation design is the inverted pyramid model of compensation range spread.
In this article, we’ll explore:
- What compensation range spread is
- How the inverted pyramid model works
- Why lower pay grades have narrower ranges
- Why executive and officer pay grades have wider ranges
- How this structure supports career progression and organizational strategy
What Is Compensation Range Spread?
Compensation range spread refers to the difference between the minimum and maximum of a salary range for a given job grade or level. It is typically expressed as a percentage:
Range Spread % =
(MaximumSalary – MinimumSalary) ÷ MinimumSalary × 100
For example:
- A range with a minimum of $50,000 and a maximum of $65,000 has a spread of 30%.
- A range with a minimum of $150,000 and a maximum of $240,000 has a spread of 60%.
Why Lower Pay Grades Have Narrower Ranges
At the bottom of the inverted pyramid—where entry-level and frontline jobs exist—compensation ranges are typically narrow, often between 20% and 40%.
Reasons:
- Faster Role Progression
Employees in early-career or operational roles are expected to develop quickly and move up into new roles as they gain skills. A narrow range encourages this progression by limiting the potential for long-term salary growth in a single role.
🔹 Example: A customer service representative may start at $40,000 and cap at $50,000, prompting them to seek promotion into a team lead or supervisor role.
- Market Uniformity
Entry-level positions are more easily benchmarked and commoditized across companies, resulting in tighter market ranges. There’s less variation in duties, making external data more standardized.
- Cost Control
Wider ranges at lower levels could result in disproportionate salary increases for positions that don’t have increased responsibilities or market demand.
Why Executive and Officer Pay Grades Have Wider Ranges
At the top of the inverted pyramid—where senior executives, officers, and specialized experts reside—compensation ranges are much wider, often 60% to 100% or more.
Reasons:
- Longer Tenure in Roles
Executives tend to stay in their roles longer. A wider range allows for sustained growth within a single role, recognizing both performance and loyalty over time.
🔹 Example: A VP of Sales may remain in role for 10+ years and receive merit increases, bonuses, or equity awards without changing job titles.
- Performance-Based Differentiation
At senior levels, compensation is heavily tied to results, strategic impact, and company performance. Wider ranges allow for variable pay based on individual and organizational outcomes.
- Talent Retention and Negotiation Flexibility
Executives are often hired in competitive environments where pay flexibility is essential. A wide range accommodates negotiations and custom offers based on skills, experience, and prior compensation.
- Equity and Long-Term Incentives
Compensation at the top often includes stock options, deferred compensation, or profit-sharing, all of which contribute to wider total compensation variability.
Typical Range Spread Benchmarks by Level
| Job Level | Typical Range Spread |
| Entry-Level / Clerical | 20% – 30% |
| Technical / Skilled Roles | 30% – 40% |
| Professional / Mid-Level | 40% – 50% |
| Management / Supervisory | 50% – 60% |
| Executive / Officers | 60% – 100%+ |
