When adding a new maxim to my ever-expanding list of Brennan’s Laws, I rediscovered this one: #13 under Fair/Competitive Pay.
Blocking senior workers from making deeper range penetration makes it probable that new people with impressive credentials but no proof of output capability will be hired at salaries well above senior incumbents with well-established abilities. That’s so much worse than pay compression that it might be called “pay oppression”!
That concept seems worthy of expansion.
Granted, slowing the compounding salary growth of veteran workers seems to be more the exception than the rule. Most organizations (especially large bureaucratic monopolies with long traditions of inertia) tend to strongly support near-infinite pay progression opportunities for senior staff. Raising grade ranges despite flat market movement and granting cash payments in lieu of base increases are always popular topics in compensation forums. The bulk of payroll growth generally tends to be expended on employees holding many years of service in the enterprise. Those long-timers with substantial job seniority usually earn the most. Sudden priority needs for new talent to be hired into comparable peer positions who demand much higher starting rates can come as a shock.
Maybe that’s why breaking with a comfortable pattern frequently results in bizarre behaviors. Like freezing pay for those earning above average … or beyond the midpoint, norm or control point. Failing to periodically adjust the relative lead highly experienced workers hold over their less seasoned job peers can also lead to serious problems. That is a particular concern today when States ratchet minimum wages higher than the Federal requirement. Even the national Fair Labor Standards Act faces revisions that will affect internal equity considerations. New challenges seem to come fast and furiously.
Another problem could come from overestimating the ability of pay that was quite generous some years ago to remain as sticky today as it was then. Misallocation of scarce money remains a constant threat, too. Continuing to tie unique jobs to low-paid internal benchmark matches when the incumbents can command premium rates for the same services elsewhere is also hazardous. There are many mistakes about compensation that are easy to make.
For example, assuming that keeping a key employee secure during a period of severe headcount reductions will make up for freezing their pay for the next few years could be dangerous. A need, once satisfied, is no longer a motivator. Gratitude doesn't last forever. Once the fear of displacement has been overcome, people again expect pay increases and resent being taken for granted. It gets even worse if they are required to train underlings who continue to get increases.
Similar “crimes” against equitable justice might be found in many compensation systems. There are a million reward schemes called “unfair” because they allow some an advantageous opportunity not offered to everyone. Quite a few offensive pay practices were published some years ago by H. R. Screwtape in the classic three part series, “Rewards that Don’t”. Originally posted on the WorldatWork total reward professional society’s website, it remains a sarcastic primer for the design and implementation of dysfunctional compensation methods still found at many employers today.
What other examples of toxic pay practices and perverse incentives drive you crazy? Bet the rain falls on others, too. Share your horror stories. Remain anonymous, if you wish; or send your submission to me privately so I can post it safely.
While such venting may not improve the bad situations, catharsis always makes you feel better. Besides, you may see some examples that give you better perspective about what is REALLY bad.
E. James (Jim) Brennan is an independent consultant with extensive total rewards experience, specializing in job evaluation, market pricing and pay budget distribution. After HR corporate jobs in chemical/pharmaceutical manufacturing, he consulted at retail, government, energy, IT, tax-exempt and other industries throughout North America before becoming Senior Associate of pay survey software publisher ERI until 2015. A prolific writer (author of the Performance Management Workbook) and speaker, he gave expert witness testimony in many reasonable executive compensation cases both for and against the Internal Revenue Service. Jim also serves on the Advisory Board of the Compensation and Benefits Review.
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