Joining the pay band: Pay transparency and increase guidelines for HCM professional

May 26, 2026

Sara Maginn Pacella

The way we think and talk about the money we make is changing. Pay transparency acts have turned taboo conversations into improved pay equity and informed career-path decisions. Human capital management professionals are leading conversations about compensation policies, salary increase standards and compensation strategies. Here is what they need to know to make an impact.

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Pay transparency

Pay transparency laws are the tip of the iceberg when it comes to salary education among the modern workforce. Following the implementation of pay transparency laws in Ontario, Louisa Benedicto, senior vice president of HR recruitment at Hays, told CTV News, “Employers have to say, ‘To do this job, you must have these skills, and I will pay you this amount of money to do it.’ It’s just a different way of looking at how you get a compensation for a new role.”

” The way we think and talk about the money we make is changing. ”

Promotion pay bands

Employer or pay equity committees create salary bands to group job classes that provide similar value of work.

Workplaces committed to creating pay bands must decide how many bands to create and the width of each. Generally, the wider the band, the more jobs fall into that category.

Some of the most common methods for building pay bands are below.

Using benchmarking or a market-based structure by reviewing salary surveys of similar roles outside of the organization to determine market rates within the organization. The median market rate is generally set as the midpoint for that particular salary band. Market adjustments are sometimes granted during this process so the company can remain competitive; these adjustments are considered separate from merit, promotional or cost-of-living increases.
Grouping jobs by “family” pay structure, where bands are grouped within a department or function and each “family” has their own set of grades and pay ranges based on market rates.
A point factor system, where bands are created by assigning points to a position based on the responsibilities in the job description. The total score is then calculated to determine which band a position falls within.
Broadbanding is when an organization has very few, wider salary bands with pay ranges where the maximum salary reaches 200 or even 300 per cent of the lowest salary in the band. This method is said to increase pay flexibility within an organization, however, all organizations must ensure that their salary ranges meet local pay legislation toward how wide pay band can be, particularly surrounding job postings.
Traditional banding structures feature many small, distinct pay grades with very narrow salary ranges. There can be as many as 10 to 30 salary ranges within this commonly used structure.
Step structures are most commonly used in unionized environments, with salary increases based on longevity.

There are many advantages to using salary bands in the workplace, including:

Consistent organizational decisions surrounding compensation;
Compliance with emerging pay transparency regulations;
Accurate salary budgeting and forecasting;
Fair and equitable pay;
Improved pay transparency;
Clearly defined pathways for employee career and pay trajectory;
Improved talent attraction and retention;
Reduced impact of bias on pay rates; and
Simplified salary administration.

Disadvantages of using salary bands include:

Complexity of building them (particularly when being introduced);
Need for consistent maintenance and re-evaluation to keep up with current market rates;
Possibility of demotivating employees who are at the top of their bands;
Geographical inconsistencies (i.e., employees who work remotely where the cost of living is lower compared to those residing and commuting within a big city); and
Lack of pay flexibility, which can be challenging for unique roles or consistently high-performing employees.

Managing promotion-based salary increases

Promotional pay increases are often tied to role evolution, as an employee’s responsibilities get more advanced. Depending on the scope of their role, this could either elevate them within their pay band or move them to a new pay band, depending on how different the new role or responsibilities are. According to Wilson Group, these increases generally represent an overall salary increase of six to 12 per cent or more.

What about cost-of-living increases?

Canadians are feeling the current 30-year high inflation rate, which was sitting at 5.7 per cent in July 2025. To address inflation, employers implement cost-of-living increases (also called cost of living adjustments, or COLAs). Cost-of-living increases are usually separate from merit increase frameworks or other paygrade movement and generally occur annually.

How do cost-of-living increases work with pay bands?

While not required in many non-union environments, it’s generally considered best practice to adjust salary bands to reflect inflation and cost-of-living increases. During a regular review, factors like the Consumer Price Index (CPI), a widely used measure of inflation that tracks price changes over time for a fixed number of goods and services, are considered before making pay band adjustments. To adjust salary bands using the Consumer Price Index, analysts calculate the year-over-year percentage change and then apply it to the minimum, midpoint and maximum of the salary band.

Current landscape for pay increases

Mercer data reveals that merit increase budgets were trending at around 3.3 per cent beginning in 2024 and remained consistent in 2025, with many organizations set to maintain this trend, keeping salaries relatively flat in 2026.

No matter the budget, transparent pay, navigable career paths and commitment to pay equity can support top talent acquisition and retention. Payroll professionals can make a meaningful contribution toward these goals.

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