In the World of Compensation, Not All Hierarchies Are Created Equal

Understanding the Role of Hierarchies in Compensation

When you think of a “hierarchy,” what comes to mind? For many, it’s a ladder—from highest to lowest, most to least important, or greatest to smallest. The Oxford Dictionary defines it as “a system or organization in which people or groups are ranked one above the other according to status or authority.”
(Source: Oxford Learner’s Dictionaries)

But when it comes to compensation hierarchy design, not all hierarchies are created equal. Many organizations mistakenly equate reporting lines or titles with job value. This confusion leads to inequitable pay practices, frustrated employees, and compliance risks.

To achieve fairness and transparency, HR leaders must base hierarchy design on scope, skill, and decision-making authority—not personalities or perceptions. A well-structured hierarchy ensures consistency, credibility, and compliance in your pay programs.

What a Job Hierarchy Is Not

A strong job hierarchy in compensation is objective, structured, and measurable. Before defining what it is, let’s clarify what it is not. It’s not:

1. A list of job titles from the CEO down to entry-level roles.

2. A ranking based on current employee pay.

3. A mirror of your reporting structure.

4. A reflection of benchmark market data alone.

5. A list based on perceived importance or influence.

A job hierarchy is not about authority—it’s about job value. It distinguishes between roles that differ in complexity, contribution, and accountability, not prestige. This foundation enables organizations to design fair, defensible pay programs and avoid the chaos of “title inflation.”

Defining a True Job Hierarchy in Compensation

A job hierarchy is a structured framework that compares jobs based on scope, knowledge, skills, and decision-making authority. Evaluating jobs through these lenses creates a fact-based structure that aligns internal equity and market competitiveness.

Without a clear governance model, leaders may classify roles inconsistently—especially when aligning peers across departments. The result? Misinformation, inflated titles, and pay compression issues undermine credibility and employee trust.

“Defending your hierarchy isn’t about winning. It’s about establishing a fact-based foundation that outlasts opinions.” — Laura Morgan

Building a Job Hierarchy: The Core Data You Need

Creating a meaningful job hierarchy requires reliable inputs and cross-functional collaboration.

1. Job Leveling Guide

Start with a Job Leveling Guide that reflects your industry. These guides provide consistent definitions for job levels—clarifying qualifications, span of control, and representative duties.

• Mercer – Job and Career Architecture

• Aon (formerly Radford) – Job Architecture

• WTW – Job Architecture and Leveling Frameworks

2. Job Descriptions

Real job descriptions (not job postings) are the foundation of your hierarchy. Each should clearly outline:

• The top five accountabilities of the job

• Minimum qualifications and key competencies

• Whether it is a Leader of People (LoP) or an Individual Contributor (IC) role

Accurate job descriptions establish a consistent baseline for comparison, future promotions, and role evolution.

3. HCM or HRIS Data

Data from your Human Capital Management (HCM) or HRIS system—like ADP, Namely, BambooHR, or Workday—adds quantitative validation.
Look for:

• Number and type of direct reports

• Reporting relationships (IC vs. LoP)

• Job level, function, and grade

• Span of control and location-based differentials

When synchronized with compensation management tools such as SimplyMerit (https://morganhr.com/simplymerit/), these data elements support hierarchy alignment, pay equity analysis, and merit cycle planning.

Presenting the Hierarchy to Leadership

Once your data is clean and aligned, visualize your hierarchy in a structured job chart. Use this presentation to lead an executive discussion focused on why and how the hierarchy was built—not just the results.

Expect some debate. Leaders often have differing views of job value based on organizational politics or tenure. The goal is not perfection, but alignment. Your hierarchy should start the conversation, not end it.

When presented effectively, it becomes a springboard for future compensation governance, not a static chart on a wall.

Types of Hierarchies and Their Relevance to Compensation

Including varied examples—from startups to global enterprises—shows that job hierarchy principles apply across industries, from manufacturing to finance to nonprofits.

Why Job Hierarchy Matters for Pay Transparency

The pay transparency movement is reshaping compensation governance. As of 2025, multiple U.S. states require employers to disclose salary ranges in job postings or upon request
(Source: PayAnalytics – U.S. Pay Transparency Laws by State).

A structured hierarchy enables HR to:

• Explain why pay ranges differ between roles

• Maintain consistency in published salary ranges

• Justify pay decisions during audits or equity reviews

• Support employee trust and engagement through clear career paths

In a compliance-driven environment, your hierarchy isn’t just strategic—it’s essential.

Technology’s Role in Maintaining Hierarchy Integrity

Compensation tools like SimplyMerit, SAP SuccessFactors, or Workday Compensation streamline complex pay structures by integrating hierarchy, market data, and employee performance into a single view.

Modern platforms help HR teams:

• Align global job levels and salary structures

• Manage multi-country pay ranges with local compliance

• Simplify approvals for promotions and merit cycles

• Visualize the span of control and pay relationships

By integrating your hierarchy data model into these systems, you turn what used to be a spreadsheet-driven process into a repeatable, transparent framework that supports equitable pay.

Key Takeaways

• A job hierarchy in compensation reflects job value, not power.

• Build your hierarchy on scope, skill, and accountability, not job titles.

• Use leveling guides from reputable providers like Mercer or Aon for consistency.

• Integrate hierarchy data into HCM or compensation tools for real-time validation.

• A defined hierarchy supports compliance with pay transparency regulations.

Quick Implementation Checklist

✅ Select and customize a Job Leveling Guide for your organization.
✅ Collect and validate all job descriptions.
✅ Pull structural data from your HCM or HRIS.
✅ Create a visual job hierarchy and test with department heads.
✅ Present findings and gather feedback.
✅ Refresh annually to maintain accuracy and compliance.

Lead with Structure, Not Chaos

A strong job hierarchy is the backbone of fair pay and strategic workforce planning. It’s what separates reactive HR practices from proactive leadership.

When organizations lead with structure instead of chaos, they build trust, enable pay transparency, and create a compensation system that withstands both growth and regulation.

Be the leader who designs clarity—not confusion—in how your organization values work.

MorganHR Insight

“The best compensation strategies start with structure, not spreadsheets.”

Understanding Job Hierarchies in Compensation

1. What is a job hierarchy in compensation?

A job hierarchy in compensation is a structured framework that ranks jobs based on their scope, skills, decision-making authority, and business impact—not on titles or personalities. It provides a fact-based way to align pay ranges, define career paths, and maintain internal equity across roles and departments.

2. How is a job hierarchy different from an organization chart?

An organization chart shows reporting relationships—who manages whom.
A job hierarchy, however, focuses on job value. It compares roles based on accountability, expertise, and contribution to the organization, not on reporting lines. For example, a senior engineer may have higher job value than a manager in another department, even if they don’t directly supervise others.

3. Why is a defined hierarchy important for fair pay?

Without a structured hierarchy, organizations risk pay inequities, title inflation, and inconsistent decisions. A defined hierarchy ensures that similar jobs are paid fairly, aligns salary ranges across departments, and supports compliance with pay transparency and equity laws.

4. What data sources are needed to build a job hierarchy?

To design a hierarchy, HR teams should gather:

• Job Leveling Guides (from Mercer, Aon, or WTW or make your own competency-based structure)

• Accurate Job Descriptions with clear qualifications and accountabilities

• HCM or HRIS Data (e.g., job levels, reporting lines, span of control)
  Combining these data sources helps organizations compare jobs objectively and support pay decisions with evidence, not opinion.

5. How does technology help maintain a job hierarchy?

Modern HR and compensation tools like SimplyMerit, Workday Compensation, and SAP SuccessFactors integrate hierarchy data with salary structures and performance metrics. This makes it easier to manage pay adjustments, maintain equity across global regions, and ensure consistent governance in merit or bonus cycles.

6. What role does a hierarchy play in pay transparency compliance?

A clear hierarchy helps employers justify why pay ranges differ between jobs.
As more states enforce pay transparency laws, hierarchies provide the structure needed to explain how roles are valued, ensuring consistency and reducing risk of audit findings or employee mistrust.
(Source: PayAnalytics – U.S. Pay Transparency Laws by State)

7. How often should organizations review their job hierarchy?

Best practice is to review your job hierarchy annually, typically before compensation planning or budgeting cycles. This allows HR to update levels for newly created roles, evolving responsibilities, or market shifts—ensuring pay remains competitive and equitable.

8. What’s the first step for HR teams new to hierarchy design?

Start with a small pilot. Select one department or job family and map roles using a job leveling guide. Validate results with leadership, adjust as needed, and expand to other groups. This iterative approach builds confidence and alignment across the organization.

9. Does every company need a job hierarchy?

Yes—regardless of size or industry. Even small or flat organizations benefit from defined job levels. As companies grow, a hierarchy prevents confusion about titles, career paths, and pay decisions, supporting a scalable foundation for fair and transparent compensation.

10. How can MorganHR help with job hierarchy and compensation structure?

MorganHR partners with organizations to design, implement, and maintain compensation frameworks that align structure, pay, and performance. Using SimplyMerit, our compensation planning platform, we help clients streamline data, improve transparency, and build a foundation for equitable pay programs.
Learn more at https://morganhr.com/simplymerit/