Pay for Performance Guidelines

Hello Forum :)

Our company gives annual % increases, 1%-3% at annual reviews.

A recent audit, done by me, has shown that a Supervisor has given an employee, who has had progressive disciplinary action, all the way up to a final written warning, a 3% increase. Hmm.. The audit also showed another employee, who has had no prior discipline was given a 2.5% increase.

My fear is that this could lead to racial discirimination, since the one employee is african american and the other employee is caucasian.. and shows unfair employment practice.

I know I have to correct this immediately, but to put a policy in place that states "problem children" will be subject to a sliding scale, based on performance.. how do I determine (or word) the appropriate language?

Do I say that depending on severity of the offense, will determine the rate (if any)?


  • 4 Comments sorted by Votes Date Added
  • On the face of this, you do have a potential nightmare in the works. However, don't be too quick to make a judgement here. It is possible your first employee does an outstanding job and jumps in to solve problems and handles issues. But perhaps they are frequently late or have broken rules, been written up, and then never broke the same rule again. Sometimes the best employees can require the most management (think Babe Ruth). Employee number two could always follow rules, but be a marginal employee who gets the minium done to keep their job.

    Do you already have some kind of policy and procedures in place? I would think you would since you mention the 1-3% span. Review them carefully. You probably have enough information there already that supervisors should know how to follow them without making a mistake so full of potential liability. If not, just add a blip about the importance of fairness and that your company does these reviews while disregarding race, etc. (however you have it worded elsewhere in your policies).

    Do both employees work for the same supervisor? If so, I would get an explanation from this supervisor, and then counsel them again on how to do reviews and give raises. If the first employee truly deserved a better raise and the second employee a not so good raise, the reasoning should have been clear in the paperwork. If they work for different supervisors, you need to retrain your supervisors as to what consitutes poor performance, what impacts raises, and how to complete the paperwork properly.

    Good luck!

  • My suggestion is entirely dependent on the size of your workforce. At Child Care Resources, all evaluations are subject to prior review by the Executive Director - me! I am able to assure that there is consistency accross the workforce when different supervisors are writing/scoring the evaluations and provide coaching and context as needed. Our evaluations are also tied to merit raises; we've found this a useful step that not only minimizes this risk, but minimizes anxiety about the possiblity of having a supervisor who is an easy grader or a tough cookie.
  • I beleive the advice given about looking further into the circumstances surrounding the disciplinary action and the rationale for the recommended increases is right on. However, I would add that in the very near future, if you truly want a "pay-for-performance" system in place, the merit increase range should start at 0% and top out at whatever your merit budget allows. Employees who are poor performers and/or who are continually being disciplined for various infractions should not be eligible for ANY increase in pay, until such time they can demonstrate they can perform up to minimum standards and abide by the rules and policies established by the company. Its hard enough to properly reward strong performers with only 3% increases, but when you say you pay for perfromance yet give substandard employees more money for NOT performing, you send a very dangerous message that says you can screw up and still recieve more money in your paycheck. This not only encourages poor performers to continue to give sub-standard effort, it also demoralizes the strong performers and can lead to them wondering why they should continue to perform to their normal 110% effort if there is not much difference in the raises they receive compared to the weak performers. I beleive our employees need to understand that any increase in pay is contingent upon consistently meeting or exceeding job requirements - they are not based upon the calandar.
  • Any true "pay for performance" system should start with periodic and scheduled performance incentives, not annual increases. High performance can be a temporary thing, but repeatable. Keep the rewards just as temporary, and just as repeatable.
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