I caught up recently with an old friend who works in an administrative position for a large professional services firm. When I told her a little about what I do, she brought up a pet pay peeve of hers: salary range maximums. Having been in her role for nearly a decade, her salary has reached the max, allowing her only limited increase opportunity going forward. As someone who’s been told she is an exceptional employee, she bristles at the suggestion that there should be a finite limit to her pay growth.
In what (at least historically) has been one of the most common salary range configurations – the 50% wide range – employees max out when they reach a base pay level 20% higher than the estimated "going rate" for their role and level of responsibility. I have had many one-on-ones and have presented to many employee groups about the rationale for salary range maximums. I tell them that an employee at maximum is earning a premium of 20% (assuming a 50% range width) over what we have determined to be the “market rate” for jobs like theirs, a likely result of them being rewarded for impressive performance in their role over a number of years.
Few appreciate hearing this, of course, and I've never particularly relished being the one to deliver the message. But it is a reality that makes sense on a number of levels – not the least of which are 1) that nobody can be guaranteed unlimited base salary growth and 2) there should be some incentive for employees to invest time and energy in growing their skills and capabilities in a way that brings heightened value to their employer.
I know, we’ve got the lump sum increase as one widely applied solution. A lump sum increase is certainly better than no increase at all.
And yes, I know. Many of you have broader salary ranges, so that the issue doesn’t rear its head until an employee is 25% 30% or more above their market wage. (Broadbands? Don’t even get me started.) Bottom line, I think there is value, for employees as well as employers, in the kinds of controls and constraints that salary ranges provide. There is protection from underpayment as well as overpayment. Ranges help ensure that there is rhyme and reason to how salary decisions are made – no small thing.
But I am nagged by the sense that there may be a missed opportunity here. Because there are employees who can and do rise above their role. Employees who can or already have delivered something extra; not necessarily something that qualifies them for a higher level job, but something with tangible value.
I'll also confess that I've not yet completely sold on the idea of wholesale movement away from job-based pay to person-based pay. I can grasp the logic and beauty of it - in theory - but I still believe that it is the exceptional organization who can execute it well. Hopefully, analytics will change that. Still, there are places where additional person-based practices can and should be considered, and the enforcement of salary maximums may present us with just such an opening. Whether through special project work, process improvement, providing mentoring or peer coaching – whether through a salary increase or some variable pay mechanism, we should be on the lookout for opportunities which open the door for alternative contributions and alternative rewards for our maxed out colleagues who have the potential to contribute more in their current role.
Can we design these kinds of opportunities to our pay programs in a way that allows both employer and employee to win? Or would these efforts create another semi-automatic entitlement which simply slides our salary maximums out without a corresponding commitment to value creation?
Any experience, wisdom or opinions to share on these questions?
Image courtesy of reconis.com
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