TREX Base Pay Structure & Grades 2 — Questions and Answers
Question 1: A company wants to minimize overlap between adjacent pay grades to create clear promotion incentives. Which design feature accomplishes this?
- Increasing the range spread
- Reducing the midpoint progression
- Narrowing the range spread (Correct answer)
- Expanding the number of grades
Correct answer: Narrowing the range spread
Narrowing the range spread reduces overlap between adjacent grades, making grade distinctions clearer and promotion pay increases more meaningful.
Question 2: Which term describes the practice of setting pay grade midpoints as a percentage increase over the previous grade's midpoint?
- Range spread
- Compa-ratio progression
- Midpoint progression (Correct answer)
- Grade differential
Correct answer: Midpoint progression
Midpoint progression (also called midpoint differential) is the percentage increase from one grade midpoint to the next.
Question 3: An employee's salary is at 115% of their pay grade midpoint. How would a compensation analyst classify this position?
- Green-circled
- Red-circled (Correct answer)
- At market
- Below range minimum
Correct answer: Red-circled
A salary above the pay range maximum (red-circle) indicates the employee is paid above the intended range, often requiring a pay freeze until the range catches up.
Question 4: Which pay structure design is MOST appropriate for an organization with many narrowly defined job titles and a strong emphasis on internal equity?
- Broadbanding
- Traditional grade structure (Correct answer)
- Market-based banding
- Step progression
Correct answer: Traditional grade structure
Traditional grade structures with many narrow grades support strong internal equity by precisely ranking and differentiating jobs.
Question 5: When converting from a traditional grade structure to broadbands, what is a common unintended consequence?
- Increased number of red-circle employees
- Loss of promotion opportunities as visible milestones (Correct answer)
- Lower market competitiveness
- Reduced manager discretion in pay decisions
Correct answer: Loss of promotion opportunities as visible milestones
Broadbanding eliminates many grade-to-grade promotions, reducing the visible milestones that employees use to track career progression.
Question 6: A pay range has a minimum of $40,000, a midpoint of $50,000, and a maximum of $60,000. What is the range spread?
- 20%
- 25%
- 50% (Correct answer)
- 40%
Correct answer: 50%
Range spread = (Maximum − Minimum) / Minimum = ($60,000 − $40,000) / $40,000 = 50%.
Question 7: Which factor MOST directly justifies using a wider range spread for senior executive pay grades compared to entry-level grades?
- Executives have shorter tenure
- Senior roles have greater performance variability and longer time-to-proficiency (Correct answer)
- Entry-level jobs have more market data
- Wider spreads reduce red-circle risk for executives
Correct answer: Senior roles have greater performance variability and longer time-to-proficiency
Senior roles allow for greater differentiation based on performance and accumulated expertise, warranting wider ranges to accommodate that variability.
TREX Base Pay Structure & Grades 2
A company wants to minimize overlap between adjacent pay grades to create clear promotion incentives.
Which design feature accomplishes this?