Top of pay grade
nlrife
3 Posts
I have several employees who have reached the upper level of their pay grade. They have not taken on additional responsibility nor are they interested in promotion. The position is only worth so much in the market.
We still want to reward for good performance but realistically cannot give an increase. Have you encountered this situation and how have you handled it? We were thinking about a bonus to recognize the good performance.
Thanks!
Comments
If you have several employees at the top of their pay grades, you are suffering from "pay compression." This is often the result of employees being happy and staying at their jobs. Their pay increases and your pay scale have probably been moving up at the same rate (3.5 to 4 percent) over the last 10 years.
While you think they have not assumed more responsibility, etc., you would probably be hard-pressed to find anything other than lesser replacements for them at their current rate. This is a recruiting issue, as well as a compensation issue, so bonuses aren't the solution.
You may not want to hear this, but your problem may necessitate salary increases in certain pay grades in order to keep your company competitive. Management may tell you "why rock the boat when we have a good retention rate?" but you must educate them on the problem, especially if these workers are older and you may face replacing them.
You don't have to take the hit all at once; you can bring people up in stages. Give everyone in a designated job group (to avoid any charges of discrimination) a partial increase in July, and then again in January.
I think there are a number of issues to consider here. First, when was the last time the company did a thorough analysis to make sure the salary ranges reflect what these jobs are worth in the market place. Some companies set ranges and then simply adjust them by a small percentage each year or every few years. However, this may not reflect what the jobs in that pay grade are actually worth in the marketplace. Individuals at the top of the range may be there because they have been with the company a long time. However, the company may be finding that it has to hire new employees at the top of the range in order to attract them--this is a whole different problem requiring a market analysis. If newly hired employees are in the top part of the salary range, the company may need to examine its salary range structure.
Next, if the ranges are inline with the market, the company needs to consider its compensation strategy. I don't agree with IrisD that you should automatically consider giving salary increases that will put employees over the maximum of their salary range. The upper end of the range should reflect the salary that would be paid to those with the most experience who are fully performing their jobs--this pay level is for the very experienced. However, the company does have a problem because it doesn't want to lose the knowledge and experience of long-term employees. In these cases, one time payments such as bonuses are good options because they do not increase the company's long term fixed costs. Perhaps bonuses could be awarded to those at the top of the grade whose job performance exceeds requirements. In this way, long-term employees are incented to continue to perform at high levels because there is a monetary award. The good news is that if the company has high-performing, long-term employees, it must be doing something right.