Designing the Base Salary Structure

Overview

• What you’ll learn: The four-step process for building a defensible, market-calibrated base salary structure in an amoeba organization.
• Estimated reading time: 10 minutes
• Source: 胡八一《阿米巴激勵體系：薪酬×獎金×股權全解析》

Introduction

The Grand Historian has observed that when organizational leaders are asked what their base salary structure is, they frequently produce a spreadsheet. When asked why any given number appears in that spreadsheet, they produce a silence that speaks volumes. The number was negotiated in an interview. It reflects what the previous HR director could afford. It matches what a competitor was rumored to pay three years ago. It is, in short, not a structure at all — it is an archaeological record of past hiring decisions.

Hu Baiyi prescribes a four-step process that converts this archaeology into architecture. Step one: define job grades. Before any salary number can be rational, the roles within the organization must be ranked by scope of responsibility, required expertise, and organizational impact. Step two: survey market data. Salary benchmarks from industry surveys, recruitment data, and peer organizations establish what the market currently pays for each grade. Step three: set pay bands for each grade. A pay band is a minimum, midpoint, and maximum for each job grade — wide enough to accommodate variation in employee tenure and competency within the grade, narrow enough to maintain internal consistency. Step four: place all employees within the bands. This placement reveals the uncomfortable truths: who is overpaid relative to their grade, who is underpaid, and what the remediation timeline and cost will be.

The resulting structure requires annual review — markets move, roles evolve, and a salary structure that was accurate in year one becomes fiction by year three without deliberate maintenance.

Key Principles

• Grade first, number second: The job grade determines the appropriate pay range. The individual’s position within that range is determined by competency and tenure within the grade — not by negotiating skill at hire.
• Market anchoring: Without external market data, internal equity drifts toward rewarding whoever complained loudest. Market benchmarks provide an objective reference point.
• Annual review cadence: Salary structures that are not reviewed annually become both competitively uncompetitive and internally inequitable simultaneously.

In Practice

When conducting the employee placement step, identify “red circle” employees — those paid above the maximum for their grade. These employees cannot receive increases until the band catches up to them or they are promoted to a grade whose band accommodates their current pay. Handle red circles confidentially, with a clear timeline, and without creating defensive reactions that cause them to exit.

Key Takeaways

• Four steps: define grades → survey market → set pay bands → place employees.
• Pay bands have a minimum, midpoint, and maximum; placement within the band reflects competency and tenure.
• Annual review is mandatory — markets move, and outdated structures become liabilities.
• “Red circle” employees require sensitive, private management with a clear remediation plan.