Which type of pay structure is likely to limit promotional opportunities?

A pay grade structure is organized in such a way that jobs are grouped into categories based on their relative value or complexity. Each pay grade typically has a defined salary range, which can potentially limit the amount of financial growth an employee can experience over time, especially when considering promotions within the same pay grade. When employees know they have limited upward movement in pay due to the defined ranges, they may perceive fewer opportunities for advancement.

Additionally, if an organization has tightly bound pay grades with minimal differentiation between them, it may create a situation where employees need to wait for significant organizational changes or openings to advance into higher pay grades. This can lead to stagnation in their career paths or reduced motivation to aspire for promotions, as the monetary incentives may not be sufficient to warrant the effort required for advancement.

In contrast, broadbanding focuses on reducing the number of pay grades and creating wider ranges within which pay can vary, potentially enhancing promotional opportunities. Annual salary adjustments relate to periodic raises rather than structural promotion opportunities, and variable pay structures are tied to performance outcomes, also encouraging movement and advancement based on individual contribution rather than rigid levels.