I recently received this email message from a storeowner: "I am
the owner of a store with 40 employees who do mostly unskilled work. Many of
them have been with us for more than 10 years and they have reached their
maximum earning potential with us. My concern is that we have 'trapped' them in
their jobs by treating them well, paying them decently for this type of work,
and providing them with medical and dental insurance."
Most organizations have fixed pay grades that specify the amount
of money that can be paid to employees in each position. The pay grades have a
minimum and a maximum salary. Typically new employees start at the bottom of
the salary range and gradually move up as they receive pay increases.
The purpose of the pay grades is to make certain that the
organization maintains good control over its total labor costs. The pay grades
also help to maintain internal pay equity. For example, supervisors,
understandably, become upset when their direct reports make more money than
But what should organizations do when their loyal, high
performing employees reach the top of the pay grade? Typically, these employees
continue to work with no pay increases except, perhaps, cost of living
The problem is that these top-of-the-pay-grade employees may
become frustrated and lose their motivation. They feel trapped.
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HOW TO HANDLE THE TOP-OF-THE-PAY-RANGE BLUES
- Set Clear Expectations for Applicants
Be open and honest with job applicants. Tell
them that when they eventually reach the top of the range, they will not be
able to earn more in that position. Tell applicants that while there are limits
to the pay they can earn in the position, they will acquire valuable training
and experience that will be useful to them in their career. These employees,
therefore, can join the organization with their eyes open.
- Add Additional Responsibilities
Another option is to offer these
top-of-the-range employees additional responsibilities. For example, assign
them the job of trainer for new employees to the department. Or ask them to
work on special projects. If you've given them greater responsibilities, you
can feel justified in offering them more money.
- Move Them Around
Move these employees to other parts of the
company and train them to perform other, higher paying jobs. If they are
committed to the organization and have provided value, give them the chance to
grow within the organization.
- Offer Longevity Bonuses
Provide selected top-of-the-range employees with
bonuses twice a year (e.g., December and June). This is not a raise and,
therefore, would not increase the cost of some employee benefits such as
company contributions to the 401(k) plan.
- Encourage Them to Leave
No one benefits from unhappy employees. It might
be best for both the organization and the employees at the top of the range if
you encourage them to leave. Tell them that because of their organizational
knowledge and loyalty you would hate to seem them go, but there is really only
so much you can pay for that job. Offer to provide them with excellent
Many organizations adopt this strategy. To maximize profits,
they hire the junior-most employees who can handle the work. As their pay
increases, they replace them with other low paid employees. It doesn't sound
fair, but after all, it's business.
Try your best to keep top-of-the-range
employees, but sometimes it's best for all involved to just part