Employee Compensation & Salary Structure Causing Turnover

An Actual Comment from an Employee Who Left:

“I can’t continue to work at the maximum pay scale for another 15 years! What a joke. I deserve more pay and respect.”

The Solution

These comments are exactly the data that HSD Metrics can find with their ExitRight Employee Exit Interviews. HSD’s tools are designed to provide you with valuable feedback to build high-performance, high-retention work cultures.

Hitting the top of the pay scale is a common frustration for long-standing employees. These individuals are valuable to their employers. It helps to have experienced people who know your organization inside and out to provide continuity. However, hitting the top of the pay scale isn’t necessarily the end of the road.

A conversation about how pay is normally structured, along with a discussion about options for future earning potential, could lead this employee to a more informed decision. How are you presenting this information to your employees?

First, let’s take a look at how compensation is normally structured. Base pay is the foundation for total employee compensation and represents the largest component of a total compensation package. Base pay is normally structured in a three-tiered range within each category of position or job grouping.

  • The minimum base pay is the lowest salary that should be paid to individuals qualified to hold positions in a specific range.
  • The midpoint base pay is given to employees who are fully trained and satisfactorily performing a job within a range.
  • The maximum base pay is the most that should be paid to individuals in a range.

Organizations make periodic reviews to determine whether base pay amounts should be adjusted. The maximum of the pay scale will likely continue to rise over the next 15 years. Think about inflation – we don’t make the same amount we did decades ago.

In recent years, salary adjustments saw slight upward movement. Projections for 2013 predict a 1.9 percent increase in base pay salaries. In 2010 and 2011, merit budget increases were 2.6 percent. For 2013, that number rose to 2.8 percent. So say our employee was making $50,000 per year and was eligible for merit raise at 2.8 percent. That’s an extra $1,400 per year.

Merit budget increases often go to the highest-performing employees, which aren’t always those at the top of a salary range. But that also brings up another important point about our example – we don’t know anything about this employee’s performance and how that could affect future bonuses or salary raises. Salary increases for employees already at the top of a range are often considered on a case-by-case basis – a strong motivation to work hard.

Employers always have the option of rewarding experienced and valuable employees who have hit the pay ceiling. Sometimes, a one-time, lump-sum bonus may be appropriate.

Finally, employers should remind employees that they have a role in their compensation. While difficult to swallow, the longest-tenured employee isn’t always the strongest person in that role. Employers can encourage top-performing employees to look for ways to advance internally within the organization, instead of feeling stuck in the current role. There is more than one way to a higher-paying position.

Contact HSD Metrics today to learn more about how ExitRight, employee exit interviews, can help your company identify and resolve frustrations that lead to turnover.