With salary increase budgets dropping ... or disappearing entirely, many organizations are trying to figure out what to do with their salary structures. Unfortunately, none of the recent updated research on 2009 salary plans (to my knowledge, at least) (see here and here) address what companies are doing relative to salary structure adjustment - only their salary increase plans and budgets.
So I am getting a lot of questions about salary structure adjustments. And, based on exactly no data, here's what I've been recommending:
Unless you have a compelling reason for doing otherwise (and some organizations do), keep your structure adjustment in sync with your salary increase budget and plans.
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If you have frozen salaries and so have (in effect) no salary increase budget, then I'm recommending that you hold your structure in place and not adjust salary ranges.
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If you are delivering salary increases, but at a lower level than originally budgeted, then I'm recommending that you adjust your salary ranges accordingly (i.e. at a lower rate than originally planned).
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If you are delivering salary increases at their original budgeted level, then I recommend you proceed with adjusting your salary ranges as originally planned.
Naturally, there are situations where exceptions to these statements are called for. For example, I have had conversations with a couple of companies who believe their salary range structures are way out of sync with the market and feel it is important to adjust them in 2009 - even though they are not increasing salaries - just to keep their overall salary program from falling too far behind. To some extent, this is a philosophical issue, and some believe it is important to keep a program competitive even in years when salaries cannot be increased.
What about you and your organization? What have you done with your salary ranges relative to your salary increase plans?
I think you have made a solid recommendation that mirrors what I recommended for our executive structures following our freezing of executive salaries. Otherwise you might have a situation where a new executive is promoted to a level higher than an existing executive that had his/her pay frozen.
Posted by: Paul Weatherhead | March 11, 2009 at 02:41 PM
Paul:
Thanks for the confirmation, and the observation. I also worry about compression issues stemming from a lack of alignment here. Of course, all that hinges on what the market will actually be doing down the road - when and how quickly it recovers. If only I knew the answer to that!
Posted by: Ann Bares | March 11, 2009 at 05:43 PM
If your salary ranges are intended to accurately reflect the outside competitive market for your jobs, then you should act accordingly. Ranges are quite different from salary budgets. One is policy; the other is practice.
Those who plan nominal increases while their relevant peer competitive labor marketplace stays flat could therefore (a) keep their range structure unchanged if they wanted to reflect the external status quo replacement-cost movement reality or (b) bump it slightly if they wanted to increase their policy structure's relative comparative position against their competition.
This is the 25th anniversary of an article in the old Personnel Journal (now Workforce Mag.) titled, "Everything You Wanted to Know About Salary Ranges." It's still valid, as a comprehensive review of the practices and options.
Posted by: E James (Jim) Brennan | March 12, 2009 at 09:25 AM
Jim:
In normal times, I would agree 110% with the "classic" approach of "ranges reflect outside market, salary budgets reflect inside practice". Problem is, this year is a bit of a game changer, probably not what the article writers had in mind when they penciled their classic piece. I don't think any of us have a clear idea of exactly what is happening in the competitive pay market - and it may, in fact, be another year or so until the dust settles and we get a good look at it. Given all that, I am reluctant to pass along my "same old" recommendations about program management. I think being cautious and keeping program elements in alignment is a sensible option until we see where all this is heading.
All that said, I appreciate the comment and the reminder - and I am interested to hear what approaches others have chosen for these "interesting times".
Posted by: Ann Bares | March 13, 2009 at 07:57 AM
Yes, a purist approach would be to change the structure based on the market even though individual salaries are frozen. But there is nothing to stop a company adjusting its structure by a higher amount to catch up with the market next year when hopefully the cash is flowing a little better.
Posted by: Paul Weatherhead | March 13, 2009 at 11:49 AM