What to Do When Workers Hit the Top of Their Pay Range

The
typical U.S. companies put ceilings on the salaries they pay and sometimes this
can cause problems. Most employees look for continued growth within a job and
without there being a new position open, there is no obvious way for an
employee to continue growth.

Until there is more pressure to expand the
money companies set aside to boost salaries, cost-of-living adjustments may not
be enough to provide individuals with a significant pay increase. Of
course, your organization needs to control salary growth, but don’t be
penny-wise and pound-foolish by taking a rigid approach, losing top performers
in the process, say compensation experts. Instead, address these situations
with a mix of alternative reward solutions, proactive career discussions and,
in some cases, evaluations of how closely pay is tied to the market.

An employer that appears to be limiting a
worker’s earning power will likely struggle to hire and keep talented people,
especially as the economy continues to perform well and the job market
tightens. You need to be prepared to explain why a person’s pay may be limited
after hitting the top of the pay range—and you must do it well. What is
bad, however, is if employees who have hit the ceiling feel unmotivated because
their manager and HR never give their compensation a second thought after that
point. How you manage these occasions will also depend on the market in which
your business operates. 

Help Workers
Help Themselves

No matter what your company does when someone’s
pay is about to plateau, preparation is key. Make sure to have
conversations well in advance with employees so that the news is easier to
deliver. Highlight what workers can do to change their compensation. Emphasize
any possible earning opportunities such as incentives.  

Pay ranges are generally tied to the labor
market, and available salary levels represent the maximum value of a given
position. If workers want more pay, they need to develop the knowledge and
skills necessary to move into another role or level.

When employees are approaching the top of their
pay level, talk to them about to improve value to the firm in order to gain
more money to pay their employees more.

Is Pay
Structure the Issue?

If
too many workers reach their pay cap too quickly, this could be a sign of an inefficient
salary system. Pay positioning is another factor to take into consideration.  In a less-competitive labor environment, you may be able to
peg pay at the median of the market. However, if talent for some or all of your
company’s positions has become scarcer, that level of compensation may no
longer be enough to attract the employees you want. In such cases, managers may
end up giving larger-than-normal increases just to keep good employees, even
though the organization has not adjusted the salary structure and ranges to
keep up with the competition.

A better approach is to conduct regular
benchmarking to see what pay each position can command. When the competition
for talent heats up and market-based pay rises, the company may need to adjust
its positioning and salary ranges. It’s a good idea to track trends, including
unemployment and quit rates, in the industry and in specific labor markets.

Pay for What You
Need

Sometimes you may need to look more closely at
pay for jobs within your company that are particularly critical to your
business.  Make sure the job and pay structure take relevant job
variations into account. For example, a controller position in one division may
be a traditional accounting-based role, while another controller supports the
sales function. ​New jobs that are deemed essential to an
organization’s success also require careful handling, especially if you have to
pay a premium to recruit for those positions.

Transparency
and the Market

Many businesses are uncomfortable with
increasing transparency about pay, but such candidness could make it easier to
manage situations when employees reach the top of their pay ranges. As state
and local governments pass laws preventing employers from asking about an
applicant’s salary history, HR must make sure pay levels reflect the work being
done in a specific role and are closely tied to the market. Then you can make a
clear case to employees about why the pay range is what it is for specific jobs
and skill sets.

At Converge HR Solutions, we
provide premier HR solutions that are cost effective and relevant to your
company. We cater to your needs by bringing in an expert team of HR consultants
that work first-hand with your company to take care of any HR needs.
Reach out to us today if your company needs help reviewing pay ranges for
employees. For more information about how Converge HR Solutions can best serve
you, please visit our website at https://convergehrsolutions.com/ or contact us directly by email at info@convergehrsolutions.com or phone at 610-296-8550.

Article Source: https://www.shrm.org/hr-today/news/hr-magazine/0318/pages/what-to-do-when-workers-hit-the-top-of-their-pay-range.aspx

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