Compression

Bill Leftwich

I am currently revising some salary scales and are faced with some compression issues. Are there any suggestions, good techniques, formulas, etc. The department consists of 8 persons,with 3 close to topping out and two just hired. Thanks.

stilldazed

We've seen something similar in our organization and have taken two approaches that seem to be working.

1. We instituted a what we call a longevity bonus. When an employee is near the max allowed for his/her job category, we have defined two specific criteria that tells supervisors how to give a 'longevity bonus.' The criteria are length of service (5 to 10 yrs & 10 yrs or more). The second criteria is performance evaluation rating. If an employee is at the max, or if a recommended merit increase would place the employee above the max, the employee's length of service determines the bonus $$ based on quantitative values we have assigned in a formula. It seems to be working pretty well. The benefits to the employees are that long-time employees are recognized monetarily, though they will not see an increase in their wages, and the value is approx equivalent to what the annual cumulative total of the increase would have been. The benefit to the organization is that the program provides a means to exert some controls over overhead costs by controlling wages.

2. The second is flattening the organizational structure, primarily for us in Florida because of state minimum wage issues. That was new to us in 2005 and impacted some of our wage costs. Fortunately, we had some vertical space in the organization to flatten, and we expect to continue with that practice as long as state minimum wages increase.

Both of the above are used for hourly workers, which constitutes the greatest percentage of our workforce. We are also nonprofit, operate in a very rural area that typically falls on the low side in state/regional wage comparisons, and we have a high number of skilled professions.

Rockie

What we generally do is when a person reaches the top of the scale, we pay out the percentage that would normally be added to their base salary in a lump sum. This gives them some incentive, but does not add to their base salary. This has worked well for us.

E Wart

I am sorry. Are you asking about compression or are you asking about reaching the maximum of your range?
Compression happens with Long Term employees when companies merit factor may not keep up with inflation and salary adjustments. If this is the case, then you can give an "appropriate position in range" increase to the long term employee to put them where they should be.
If you are talking about maxing out of their range, there are several suggestions. Do you need to look at the employee's job to determine if the range is appropriate, have they taken on more duties, use more technical equipment, have to have some extra degree that didn't use to have. If so, you may need to adjust the range. If employees have reached their max because they have been on the job a long time, they may have to be told that they are "being paid' for what they do. To get more money they will have to take on more responsibility, or do something that will cause their range to be adjusted. (My example on this is in my prior life, we had a receipitonist/telephone operator who had been with the compmany 50 years. (Yes, 50 years.) She was the best in the country, knew everyone who called or came in, knew all employees routine and where they were when, etc. However, she did reach her max. She was excellent and given reviews that showed this. However, she was already being paid for this. Sometimes employees just like what they do and don't want to change for money. She was one of those who just appreciated the opportunity to be at work.
E Wart