Uniting Talent
with
Opportunity
In today’s constantly shifting labor market, the question "How much is theright salary to pay?” continues to puzzle HR and finance leaders alike. Paytoo little, and you lose top talent. Pay too much, and costs rise, impactingprofits. So how can you build a salary framework that is both competitive andbudget-optimized? This article will give you a clear and strategic approach totackling this challenge.
A well-designed salary system helps attract talent without overspending.
1. Why your salary framework needs to be both competitive andbudget-optimized
A salary framework isn’t just a list of pay levels—it’s the foundation forattracting and retaining talent, maintaining internal equity, and managing costseffectively.
If it lacks competitiveness, you risk:
- High-quality candidates rejecting offers from the first recruitmentstage.
- Current employees easily "jumping ship” for better offerselsewhere.
If it lacks budget optimization, you risk:
- Financial imbalance, affecting cash flow and operationalactivities.
- Internal inequity if certain roles are paid above reasonablethresholds.
The salary framework is not just a number—it’s a talent retention strategy.
2. Steps to building a competitive salary structure
Designing a salary structure that is both competitive and financially alignedrequires more than guesswork or copying another company’s model. You need asystematic process grounded in market data and adjusted to your internalrealities.
2.1 Evaluate job value and strategic contribution
Not all roles have the same impact on business performance. The first step is toaccurately assess the value of each position.
Companies should:
- Categorize jobs by function – e.g., finance, operations,marketing, technology.
- Rank by grade & complexity – defining responsibilities,scope of influence, and required competencies.
- Assess contribution to strategic goals – e.g., rolesdirectly tied to revenue or operational efficiency often carry higher value thanpurely support functions.
2.2 Gather market salary data – standardize and filter
To ensure competitiveness, reference salaries currently offered in the labormarket. However, data must be reliable, up-to-date, and relevant to yourindustry and company size.
Potential sources include:
- Professional salary surveys: data categorized by industry,job level, company size, and geography.
- Recruitment/headhunter partners: Can provide role-specificinsights, especially for senior or niche positions.
- Public job platforms: For roles in tech, banking, ormarketing, platforms like VietnamWorks, TopCV, ITviec, JobHopin often listsalary ranges.
Note: Always standardize data for equivalent positions (matching joblevel and scope) and filter for similar industry and company size to avoidmisleading comparisons.
2.3 Set salary ranges – minimum, midpoint, maximum
After job evaluation and market data analysis, create pay ranges for each rolegroup. Each range should have three key levels:
- Minimum (Min): The lowest pay in the range, for newcomersor those not fully meeting job requirements—yet still competitive enough toattract entry-level talent.
- Midpoint (Mid): The market-aligned, internally balancedrate, often used for employees who meet performance and competencystandards.
- Maximum (Max): The highest rate for exceptional performersor strategically critical roles. This should be carefully managed to avoidexcessive pay gaps.
Recommendation: Salary range spread should generally be:
- Staff: ~30%
- Middle management: ~40%
- Executive level: 50%+
A salary level that creates room for growth and motivation to work.
3. How to optimize budget while maintaining competitivepay
With economic uncertainty and profit pressures, the challenge is to "payenough to retain talent, while keeping the budget sustainable.” The truthis, you don’t have to pay the highest in the market to compete—you just needsmart reward policies and a performance-driven approach.
3.1 Combine fixed salary with flexible benefits
Instead of inflating base salary—which increases long-term fixed costs—design aTotal Rewards package combining base pay, variable pay, andnon-financial benefits. This boosts perceived value while controlling costs.
Possible strategies:
- Performance-based bonuses (KPI/OKR-linked): Tie rewardsdirectly to outputs (e.g., revenue growth, client retention, internalsatisfaction scores). Employees "earn” higher pay throughresults.
- Flexible benefits: Let employees choose from options likeenhanced insurance, flexible hours, mental health support, hybrid work, or extraleave days. These often cost less than base salary increases but significantlyimprove engagement.
- Career development & promotion pathways: Invest intraining, mentoring, and individual development plans (IDP) so employees seelong-term growth. For mid- to senior-level talent, career potential oftenoutweighs short-term pay.
3.2 Apply the "Pay for Performance” model
A common mistake is inflating payroll by granting raises based on tenure oracross-the-board increases. Instead, shift to Pay for Performance(P4P), aligning pay with both individual results and companyperformance.
Benefits:
- Focus spending on true value-creators.
- Boost motivation by linking pay directly to contribution.
- Reduce internal resentment when high performers see clear rewarddifferentiation.
Implementation examples:
- Bonus tiers tied to KPI/OKR achievement (<80% = no bonus, 80–100% = 1x,>100% = 1.5x).
- Annual salary adjustments based on both performance ratings and competencyassessments.
3.3 Manage salary budgets with a long-term plan
A sustainable salary framework requires strict control of the totalpayroll budget. Salary spending must be tied to long-term financialstrategy and staged workforce growth.
Best practices:
- Quarterly/yearly payroll planning: Forecast headcountgrowth, average salary adjustments, annual/holiday bonuses, and allocate budgetsby department.
- Regular range reviews: Adjust only when justified—due toinflation, industry shifts, or talent shortages.
- Identify "strategic roles”: Allocate more budget tohigh-impact, hard-to-replace, or strategy-critical positions (e.g., R&D teams,key account managers, growth leaders). Use non-financial retention tools forother roles.
Pay the right people – for the right performance – at the right time.
4. Common mistakes to avoid when building salarystructures
- Not updating to market changes: Outdated data makes yourpay uncompetitive.
- Lack of internal transparency: Breeds mistrust amongemployees.
- Emotion-driven pay decisions: Based on relationships ratherthan performance.
- No link between pay and strategy: Treating salaries as purecost rather than a business growth driver.
With over 20 years of advising both Vietnamese and FDI companies,HR2B understands industry nuances, job levels, and thefinancial pressures businesses face.
HR2B’s salary framework consulting services help you:
- Build a pay system aligned with long-term HR strategy.
- Balance market competitiveness, internal equity, and budgetcontrol.
- Optimize labor costs while retaining top talent.
Salary structures are no longer just an HR task—they are a survival strategy forthe entire organization. When pay is both competitive and budget-smart,companies can attract and retain talent, inspire performance, and sustainablymanage HR costs.
Contact HR2B for expert consulting on compensation, HRstrategy, and labor market insights.
Top page