A wage-grade pay scale uses a set of standardized grades to rate positions in terms of compensation. Any employee hired into a position with a particular grade receives the same paycheck, even if the jobs may involve very different activities. Government jobs often use this type of system, with many positions following either the General Scale or Federal Wage System pay scales.
Typically, wage-grade systems use several broad grade bands, with smaller steps inside each grade. This allows employees to be promoted for good work or long service while remaining inside the system. In many cases, a specific position is limited to certain pay grades, requiring employees to seek promotion or transfer once they reach the highest pay step.
The objective of a wage-grade pay system is to standardize pay rates among employees. In the federal system, auditors attempt to match grades with average pay rates in the civilian sector, with different grade bands corresponding to blue-collar and white-collar positions. This standardization makes it easy for workers to transfer to other jobs in the system, since any job in a worker's current grade automatically offers the same compensation package. Typically, pay rates are reassessed every few years in an attempt to keep the grade system competitive with private jobs.