What happens with grade overlap in wage and salary administration?

by on June 16, 2009 · 0 Comment POSTED IN: HR Info Center

Remember to control the perceptions in wage and salary administration

With proper wage and salary administration, grades go up like stairs. They can overlap a little bit. You’ll notice here that the – in this situation, a senior person of junior grade can get paid more than a junior person in a senior grade. Let’s assume these are both accountants with no managerial responsibility.

Accountant 1 is zero to five years of experience. Accountant 2 is five to five plus years of experience. In most cases with conventional wage and salary administration, it’s possible for a short while that somebody moving up really fast could be paid more than somebody or could be paid less than somebody who has been around a long time in a more junior position.

However over time the more senior job is going to get paid more. That’s a natural part of the game here. Now, the problem when we tell people we’re paying pay for performance and we make this big ritual of sitting down with somebody talking about salaries – a performance discussion, is because we sit down with them and we teach them – let’s see here, okay, that that senior person – in this case, he’s getting 1.5%. They’re all depressed. The junior person is getting 5%. They’re all happy, okay.

Meanwhile, most of the difference in wage and salary administration between those raises is accountable much more by where the person started than by their last year’s performance.

In other words, we’re not even paying the guy on the left at midpoint and yet he’s all happy because he thinks we like him 5%. And the person on the right here is all depressed because we’ve told him we like him 1.5%.

After years of poor wage and salary administration verbally tying how much we like him to the amount of the pay increase, we’re suddenly changing our story. And now we’re saying, “Well, you know, it’s not all about last year’s performance. You know, there are other factors like we’re already paying you a lot of money. And you know, I can’t promote you right now.”

But the guy in red there, he’s going home all depressed. And the one on the left is thinking, “You know, they really love me. My ship’s coming in.” Okay, this is not how much we like somebody, the amount of the increase. There’s really much more in this case, potentially a reflection of how much we think about them.

If you’re not careful, poor communication about wage and salary administration is just going to come back to haunt you
I don’t care who you are. You can’t keep raising people’s pay because they’re doing a good job. You must always have to – always will have to factor in somebody’s compa ratio first.
Edited remarks from the Rapid Learning Institute webinar “How to Drain the Drama from Salary Reviews: A Conversation Roadmap” by Gary Markle

Leave a Reply


Request a Free Demo

We'd love to show you how this industry-leading training system can help you develop your team. Please fill out this quick form or give us a call at 877-792-2172 to schedule your one-on-one demo with a Rapid Learning Specialist.