I was talking with an employer client recently about the pay grades and base salary ranges my team developed for their organization.
There were a few employees paid above the maximum of the salary range. We were discussing what to do about that and here is a list of my recommendations:
1) Don’t continue to give them base pay increases until the ranges allow for base pay growth in the future. This assumes you will update the pay grades and ranges annually.
2) Consider providing a lump sum payment in lieu of a base pay increase during your merit planning process.
3) Have a one-on-one conversation with the employees paid above the salary range maximum. Be transparent about their situation. It sounds like this:
a. “John, We recently had an external consultant help us compare what we are paying our employees to what other employers are paying for similar jobs.
b. The base pay range associated with your Accountant job is $X - $Y. Your base salary right now is $Z which is above the maximum of the range.
c. What this means is that you are paid very well for the job you are performing.
d. I also recognize that this may be disappointing, because I am assuming you want to continue to see your base salary increase over time. Is that assumption true? (John says yes.)
e. One way your base salary can increase is through a promotion. So, I encourage you to look at our job postings to see if there is anything you would like to apply for.
f. Another way is to have your job responsibilities change substantially enough to have your job re-evaluated by HR and assigned a higher pay grade.
g. With no change to your job responsibilities, you will be eligible for a lump sum payment in lieu of a base pay increase during the merit planning process next year.
h. Do you have any questions?”
The employer asked if they could treat the maximum of the base salary range as a suggestion and not as a “hard stop.”
My response: “Yes, of course. As an employer you get to choose how to spend your limited budget on your employees and their pay. However, consider this. You have more than 10% of your employees underpaid. And it would take $X to get their base pay to the minimum of the base salary range. What is a better use of your budget? Paying more to underpaid employees OR continuing to pay more to very well-paid employees? At some point, you have to say “no” or why have base salary ranges at all? And finally, consider pay equity. Continuing to over pay isn’t helping you reach that goal.”
· Employers: Are your base salary range maximums a hard stop or are they a suggestion? And if they are a suggestion, at what point do you say no more?
#compensation #rewards #hr #humanresources #paygrades #pay #payequity #paytransparency #fairpay