What does the Principle of Parity suggest about pay ranges in structured pay systems?

The Principle of Parity indicates that as organizations implement more pay grades in a structured pay system, the pay ranges within those grades tend to become smaller. This principle is based on the idea that with an increased number of grades, the distinctions between different levels of work or job responsibilities necessitate tighter controls over compensation to maintain equity and fairness within the organization.

By introducing more grades, organizations are able to more accurately reflect the varying levels of skills, experience, and job complexity among roles. This leads to narrower pay ranges within each grade to ensure that salaries are appropriately aligned with the responsibilities and expectations at that level. Consequently, the smaller ranges help to create a more precise and equitable pay structure, allowing for differentiation based on performance and contributions at each grade while minimizing overlap and confusion in compensation levels.

In contrast, having fewer grades would typically result in wider pay ranges, as there would be a broader mixing of differing roles within the same pay structure. Hence, the correct option reflects the essence of the Principle of Parity effectively.