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SALARIES RANGES AND RECRUITMENT
To this point, we have assumed that the organization has been hiring people who meet the minimum qualifications of the job; and moving them up in the range as they gain competency in the job.
Q: What if a company hires an experienced person with full capabilities to perform the job from the beginning?
A: This person should be hired at or near the market rate (the midpoint).
New employees normally can be brought into the organization at a point anywhere up to the midpoint of the range, based on their qualifications.
Overpaid and Underpaid Employees
The salary range defines the minimum and maximum that the organization is willing to pay for a given job.
Clearly, implementation of a new salary structure will typically include employees below the new range minimum and employees over the new range maximum. Salary administration practices can also create pay rates outside of the prescribed salary range. Outliers need to be minimized as this will help to minimize pay compression.
Terms of the Trade
Green circle and red circle are variances to salary range values that fall outside of the stated maximums and minimums.
| Green circle | Red circle |
|---|---|
| Green circle refers to employees who are paid below the salary range minimum. Typically, this would occur prior to the implementation of a new or updated salary structure. | Red circle refers to someone who is paid more than the salary range maximum. This is sometimes referred to as “maxed out.” |
Overpaid Employees
Example: Example: Emma’s job has changed recently and has been re-evaluated to a lower grade. Emma was at the range maximum of her old salary grade so now she is paid above the maximum of her new grade. The company does not wish to reduce her salary. She is a red circle employee. Typically, red circled employees are not eligible for a salary increase until the salary range is above their current pay rate. They may also be eligible for a lump sum merit increase.
Underpaid Employees
A person paid below the minimum rate range for his or her job is said to carry a green circle rate. This situation usually occurs when the salary structure has changed upward, and the individual is below the minimum of the salary range.
Adjust Pay Up
Little question exists regarding the appropriate response to underpaid employees:
Raise the underpaid employee's pay to the minimum of the range.
The change should occur immediately or, at the very least, in a couple of steps. All employees should be at least at the minimum of the salary range for their job when a salary structure is implemented. The difference between an employee’s rate and the minimum of the range should be made up by the employer.
Every organization should have a strict policy of aligning out-of-line rates. Doing so protects the integrity of the pay system and minimizes compression issues.
Q: What if there are many underpaid employees in an organization?
A: A careful review is required. Not only may the cost of adjustments be high, but equity between the newly raised employees and other employees on the job may require a phasing-in of increases. If the organization cannot afford the adjustments to minimum, consider widening the range so that the adjustments become affordable. Also, review the market match for the jobs under minimum to ensure they have been matched appropriately when the salary structure was developed.
Special note: Examine all underpay situations to rectify possible discrimination practices.
Memory Jogger
People who are competent in the job should be hired at the: