In Workday HCM,compensation gradesare a foundational component of the compensation framework and are primarily used to definepay ranges(minimum, midpoint, and maximum) for roles within the organization. These grades are typically associated with job profiles, positions, or job families to ensure internal equity and market competitiveness.

From a transactional perspective, compensation gradesguide users with appropriate security access—such as HR Partners or Compensation Partners—when entering or proposing compensation amounts during staffing and compensation events. When a worker is hired, promoted, transferred, or receives a compensation change, the assigned compensation grade determines the acceptable pay range that can be entered in the transaction. This ensures consistency, compliance with company policy, and alignment with compensation strategy.

Compensation grades donotcalculate compensation basis, connect compensation to payroll earnings, or determine overtime eligibility. Those functions are handled by compensation basis rules, payroll mappings, and time tracking or FLSA status configurations, respectively. Instead, compensation grades act asreference structuresthat inform and constrain compensation entry, often working in conjunction with compensation plans and guidelines.

Additionally, compensation grades can be used in reporting and analytics to compare compensation across roles and to identify exceptions where pay falls outside the defined range. Overall, their primary purpose is toprovide guidance and controls for entering specific pay rates, making option D the correct answer according to Workday Pro HCM best practices.