Building a Fair Salary Structure as a Talent Retention Strategy

Key Takeaways

• Retention is rarely about paying more; it is about whether pay is organized around a fair, defensible logic.
• A fair salary structure balances three principles: paying for position, for competency, and for performance, instead of for title and tenure.
• Since Decree 145/2020, the old rule requiring a 5% minimum gap between pay grades no longer applies; companies now set the spread by job value.
• A fair structure has to be maintained, through periodic reviews that prevent pay inversion and through data-based pay decisions rather than gut feel.

A salary structure is a system of pay grades reflecting the value and complexity of each job, and it forms the basis for hiring, negotiating, and paying salaries. According to the Talentnet-Mercer TRS 2025, base salaries at the leadership level in domestic firms trail multinationals by as much as 43%, yet paying more does not automatically retain people better. This article moves from why structure drives retention, to the three principles of a fair structure, how to build one on the 3P model, and how to keep it fair over time.

Why Salary Structure Drives Retention

The retention problem rarely sits in the absolute number, but in whether pay is organized around a fair logic. Two people contributing equally but paid noticeably differently, with no clear reason, lose trust quickly, and once trust is gone no raise buys it back.

The data makes this concrete. Domestic firms tend to pay higher performance bonuses than multinationals, yet voluntary turnover stays higher, 9.8% versus 6.6% in the first half of 2025. At senior levels, retention is driven mainly by non-financial factors such as culture and career, not by the pay figure itself. Money can attract; structure and fairness are what keep people.

It helps to separate two things that often get merged. Building a salary structure means setting the base, the grades and the logic behind them. Adjusting each person’s pay against performance and the market is the work of the annual salary review. This article focuses on the base, the part that decides whether every later adjustment is fair.

Three Principles of a Fair Salary Structure

A fair salary structure balances three principles, commonly called the 3P model. Instead of leaning mostly on title and tenure as older approaches did, it distributes weight by real value:

• Pay for position (around 40%): each role is priced by the value and complexity of the job, not by the person currently in it.
• Pay for competency (around 35%): recognizing actual skills, experience, and capability, rather than years of service.
• Pay for performance (around 25%): reward tied to contribution, creating motivation and clear differentiation between levels of output.

On top of these principles sits a legal minimum. Article 93 of the 2019 Labor Code requires companies to build a salary scale, consult the employee representative body, publish it at the workplace, and keep the lowest grade at or above the regional minimum wage. One point many companies still misread is the belief that grades must stay at least 5% apart. That constraint belonged to an older regulation and was removed under Decree 145/2020, meaning companies are now free to set the spread between grades by job value, as long as the structure reflects real complexity and is negotiated transparently. The principles are clear; the hard part is turning them into an actual salary structure.

How to Build a Salary Structure on the 3P Model

Building a 3P salary structure is a sequenced process where each step feeds the next. This is where the final structure earns, or loses, its fairness and its grounding in reality.

Assess the current system and standardize job descriptions

The first step is to capture the current picture: list every role, review how pay is applied today, and standardize the job description for each role. Vague or overlapping job descriptions are the root of unfairness, because you cannot price what has not been clearly defined.

A useful tool here is mapping roles and responsibilities across positions. It tends to expose imbalances ignored for years, such as one person carrying too many critical tasks while another role is nearly empty. Fixing these gaps before scoring keeps the salary structure aligned with real work instead of formalizing an existing mistake.

Score job value and set grades

The second step is the heart of the build: measuring the value of each position with a consistent method, then grouping positions of comparable value into the same grade. Scoring is applied uniformly across all positions, usually against a fixed set of factors:

• Complexity of the work
• Scope of responsibility and decision authority
• Competency and qualifications required
• Impact on business results

The result is an objective value order that replaces gut feel as the basis for grading. The number of grades depends on organizational complexity, and what matters more than the count is the logic of the spread between grades: each step up should be large enough to recognize a real difference in value and encourage progression, without opening gaps that make no sense. Because the hard 5% rule between grades has been removed, companies have full latitude to design that spread by job value rather than by an imposed figure.

Benchmark the market to price each grade

The third step attaches each grade to a real pay range rather than a single figure. Using survey data by industry, size, and ownership type, each grade is given a band with a floor, a midpoint, and a ceiling, wide enough to reflect differences in experience and contribution within one grade. In parallel, a company chooses its pay positioning, tracking the market median for most roles and deliberately paying above it for scarce, high-demand skills. Without market benchmarking, a structure that is internally consistent can still drift far from the market and lose its ability to retain.

A well-built structure makes a large difference, but it also takes patience. Thanh Cong Technical Service is one example, moving from managing pay by instinct to a data-based 3P system over a rollout that ran for months across stages from job analysis and value scoring to finalizing the pay policy. That shift accompanied its growth from 16 employees and VND 150 billion in revenue to 139 employees and over VND 1 trillion. Once the structure is solid, allocating the raise budget to each person belongs to the annual salary review, a separate process that runs on this same foundation.

Keeping the Structure Fair Over Time

A salary structure that is fair today can turn unfair after a few hiring cycles, so the structure has to be maintained through three habits:

• Review equity periodically: the most common risk is pay inversion, where new hires are paid more than tenured staff in the same role because the company chases market entry pay and forgets internal adjustments. Comparing duties, experience, appraisal results, and total rewards across comparable roles surfaces hot spots before they become a crisis.
• Make pay transparent with data-based formulas: replacing managers’ subjective calls with a clear formula lifts the share of employees who see the process as fair from 45% to 72%. Presenting pay as total rewards, including insurance, development, and flexible benefits, also helps people see the real value of the package rather than the base number alone.
• Use non-cash levers when budget is tight: employee stock options (ESOP), development paths, priority on attractive projects, and flexible schedules all preserve a sense of fairness for core talent during cautious periods.

Conclusion

A salary structure is not, in the end, a compliance spreadsheet; it is a statement of how a company values its people. In a market where paying more does not guarantee retention, the advantage belongs to companies with a fair, transparent structure anchored to job value, not to whoever spends the most.

The move for leadership is to treat the salary structure as part of the retention strategy, built on data and maintained with discipline. Talentnet’s salary structure consulting, together with Talentnet-Mercer survey data, works with companies to evaluate job value, set grades, and design a salary structure that is competitive and fair from the foundation up.