EE hitting top of pay scale

TD

We don't have formal pay scales in place for any our jobs. This has never been an issue, b/c of the high turnover and fast progession "up the ladder" in our industry. All that was used in the past were industry standards/salary surveys as our checks and balances.

My problem is that some of our non-professional staff have gotten to a place where, due to their many years of service, they are now compensated VERY well for their job. I do not see the scope of their job changing at all, and they are not qualified to take any other sort of job here.

How do I tell them (it's time for performance and salary reviews) that we do not plan to reward them with salary increases b/c they have reached what we are considering the top of their pay scale? They will be totally blind-sided by this, as this has NEVER been discussed with them before. (Reminder - we don't really have pay scales in place). Can we simply just decide at any time that someone is making too much money and cut them off? Unfair as it might be, I just want to be sure that we weren't supposed to provide advanced notice to the EE as to what those pay scales are.

Margaret Morford

You can freeze anyone's pay at any time as long as what you do does not establish a discriminatory pattern i.e. only freezing the women. It sounds as though you need a compensation system of some kind. If you can afford it, you should have an outside third party do this for you. First, because you probably don't have time to do it and second, because it will make the study and whoever does it for you the scapegoat for the ceilings, instead of you or your company. I can recommend someone who is excellent if you need a recommendation.

If you can't afford someone from the outside, you will have to put together your own comp system. Locate a local salary study and draft your own plan. I wouldn't just feeze a few jobs, but look at all of them and develop a minimum, midpoint and maximum salary for all jobs.

You might consider paying those employees past the maximums a lump sum raise as a bonus at the end of a year of employment. For instance, if your raise guideline is 2%, explain to each of them that they are topped out, but that if they stay for the next twelve months, you will pay them lump sum 2% of their salary. Make it clear in writing that they must stay the full year to collect the bonus - no pro ration! Then their base salaries don't go up every year. You should increase your minimum and maximums to keep pace with inflation. Explain to them that if they want to make more money, they need to increase their value to the company by taking on a different job that pays more.

Hope that helps. Call me if you want to discuss further.

Margaret Morford
theHRedge
615-371-8200
[email]mmorford@mleesmith.com[/email]
[url]http://www.thehredge.net[/url]

HS

Ditto to what Margaret said. Although, just a thought, if you are doing a performance review for LAST YEAR'S performance I'd give the one time 'bonus' RIGHT AWAY as a 'reward' for the good year they had. Then you can inform them that each year going forward, if they are at the top of their salary range, you'll be doing the same thing.

lnelson

We are in the same position. We have been considering setting up pay rate ranges for each position. Once someone reaches the top pay rate and is unable to move to another dept due to experience with the position to not have performance raises every 6mths or year but to just do a cost of living increase no more than 2% once every year or 18 months. Is this acceptable? It has been pondered for several months now but, nothing is in the works. Any ideas?

crawfod

Establishing pay scales has its benefits when faced with problems like yours. We have such a pay plan and when our employees "top out" the only increases they get comes from a COLA, but we do increase the scale accordingly.

Before you begin a bonus program, study up on what FLSA says about bonuses and its effect on calculating overtime. Also, my advice is you put in a clause that says these bonuses are subject to an annual review and are not guaranteed. Leave your company a way out of such a plan for when financial conditions are poor. You implied that only certain employees were in need of a pay review/action, but if you pursue the bonus ideas be careful that this effort to help one group of employees doesn't blow up, and you have to deal with the rest of the workforce that feel they deserve bonuses too. You might be facing discriminatory issues. Finally, be clear as to what criteria it takes to get a bonus. For instance, will you give a bonus to an employee who missed 6 months of the year due to a disability? How about the employee who was written up 4 times for poor attendance and is just one occasion away from separation? How about the employee who has been disciplined for poor work performance, whom everyone knows recently screwed up a major account? Besides the obvious extra cost you will be recommending your company incur, a bonus system has headaches. Proceed with caution.

Margaret Morford

I may be missing something here, but your wage scales already encompass the COLA. That's the reason you move them every year. I wouldn't give a COLA raise on top of that. If they are over, no raise until the scale catches up or do the lump sum bonus we talked about above. Remember, these people do not want to take on more responsibility to earn more money. You don't want to incentivize them not to strive and improve their skills.

Margaret Morford
theHRedge
615-371-8200
[email]mmorford@mleesmith.com[/email]
[url]http://www.thehredge.net[/url]

scottorr

At my last employer we developed a pay scale that we adjusted every two years to make sure we were in line. Once an ee reached the top of the scale we would pay out a lump sum. It was a percentage of the employees salary. We would divide the lump sums into 4 quarterly payments. It was a pain to track but the ee's were satisfied.

At my current employer, our pay scale is based on market rates only. If the market doesn't change, there is no increase. Now keep in mind we pay in the top 75 percentile, so our employees are generally happy with their salaries and know they will be hard pressed to find a higher paying job.