What Do You Do When Employees Reach Their Salary Maximums?

by David Creelman | Posted | Total Rewards

What Do You Do When Employees Reach Their Salary Maximums?

Here’s a problem I don’t have a satisfactory answer to: how do you explain what salary maximums are?

That sounds like a dumb question, but bear with me a moment. It seems obvious that for a given job grade we have a salary minimum, a midpoint and a maximum.

However when I ask college students studying HR what to do when someone hits the maximum wage they give the following answers:

  • Promote the employee
  • Give them a bonus
  • Give them a small increase, even if it moves them above the maximum wage

When pay maximums aren't really maximums

It’s rare for a student of HR to say “The pay maximum is the maximum, and if someone hits that then they don’t get a raise.”

I sometimes hear “Well, salaries go up with inflation, so they will probably get a raise as the whole pay structure moves up.” That’s better, but it implies that we hope that if we do this they won’t notice they are at the maximum wage.

Should salaries increase indefinitely?

So here is my problem with communicating pay maximums: Employees (and some HR students) feel that pay should, more or less, go up indefinitely, year after year, forever. That feeling cannot be washed away by the logic of your pay structure.

The Finance department's view on salary maximums

On the other side of the house, finance managers look at people being paid the maximum salary and ask: why can’t we get rid of them and replace them with someone at the minimum who will be doing “exactly the same job”?

The answer ought to be that the reason an employee is paid the maximum is because of their performance (the result of years of experience). It wouldn’t be the same if you replaced them with a novice.

But don’t expect finance people to retain this insight for long; they’ll go back to their spreadsheets, and what looks like an easy solution to lowering costs will be staring them in the face.

Where does that leave you?

Finance feels you should pay the minimum. Employees feel they should be paid above the maximum. Compensation professionals are caught in the middle.

How do you convince people that the salary ranges, as you have structured them, make sense?

My conclusion is that you cannot permanently convince anyone; you have to accept that part of your role is patiently explaining, time and again, why the salary system works the way it does, and what the consequences would be of abandoning it.

It’s about patience and persistence; that’s all you’ve got in the tool kit, and those two virtues are essential character traits for the reward professional.

Using Compensation and Rewards to Drive High Performance

Explore the implications of Lean systems for all aspects of total employee rewards, including base pay, careers, incentives, and recognition.


Watch Now
Cover
Cover

Using Compensation and Rewards to Drive High Performance

Explore the implications of Lean systems for all aspects of total employee rewards, including base pay, careers, incentives, and recognition.


Watch Now


Related Articles


Close [x]

Get our Saba Blog Digest email delivered right to your inbox.

Join over 100,000 of your HR peers: