I think you need much more flexibility than this. I've worked for several companies with this kind of scheme and had to fight and juggle with the system and the

I think you need much more flexibility than this. I've worked for several companies with this kind of scheme and had to fight and juggle with the system and the scales to be able to reward my staff appropriately. It is very easy to end up with a middle-of-the-road performer, who has a broad skill set and much experience and is therefore very highly valued by a formula. It is extremely frustrating to have to pay them more than someone with less experience and fewer skills on paper, but who is perhaps making a tenfold greater contribution to the company. Rigidity in the formula itself is not the only problem. I've encountered rigidity in how to apply the formula. I was responsible for a team of engineers in such an organization a few years back. They were a fantastic bunch altogether, but we had a real star who transferred in. She'd been barely raised above the starting graduate scale, despite making a pretty significant contribution to the company as a whole. When I discovered this, I set about re-assessing her ranking based on the company's formula and basically worked out that her salary needed to double - it had to jump about 3 pay bands. My request was turned down - it was apparently too big a jump! I was left wondering if I should ask her to stop doing some of the things she was doing - like mentoring new employees, since the company wasn't prepared to pay her for it. I didn't stay there, and neither did the star engineer. I think in a smaller, less bureaucratic organization perhaps these schemes have a better chance of working, as long as the formula leaves you enough flexibility.