Exception to Salary Increase Policy???

We have a policy that salaries that reach the top of the range are frozen until we've updated our ranges via compensation study, if the person isn't in a position to be promoted to a new level.

My CEO has inquired about a raise for our COO, which will raise her above the range for her position. I actually agree with the justification for the raise -- she has performed in an extraordinary way under an unusual set of circumstances I won't detail here, but they are exactly in line with our rationale for salary increases.

My dilemma -- do I stick with our policy, or create an exception?

Some history... this policy has created difficult moments for us in the past, mostly when someone has been in a job a long time and through steady good performance has increased their salary up to the top of the range. We have frozen those salaries until the ranges were updated, and it is difficult for people to swallow. These haven't been instances where people would have been eligible for an extraordinary increase, but it has meant that any increase has been denied that exceeded the range. A complicating factor for my current situation is that the historical situations involve more junior positions, so an exception for a senior person doesn't send a good message.

A bonus is a possibility, but it shouldn't really be used to get around a policy, which feels like would be the case here. We issued one bonus in my tenure, and it was for extraordinary performance that was one-time in nature because it was needed but outside the person's job description and unlikely to be required again any time soon, so we didn't want to add this to the person's salary base.

This maybe is too detailed for an easy answer, but I'd appreciate any discussion on exceptions to salary policies, what you do when a person hits top of your salary range, etc., that would help me think about this.



  • 8 Comments sorted by Votes Date Added
  • All policies should be written so that you can make an exception, however, you don't want to set yourself up for other problems. Plus, if you give this employee the raise, then what happens next year if her work is once again outstanding and she is already maxed? Even if it isn't she might still be maxed and that will seem like a slap in the face to her.

    I suggest a bonus. Bonuses are usually for unusual or exceptional items, so this applies.

    Also, I would consider rewriting your policy. We also have wage ranges and our employees can max out. However, we give any employee who has maxed out and would have otherwise received a raise a lump sum payment. This way they still get something for being a good employee, but it helps keep costs down. The lump sum doesn't necessarily equal the amount they would have been paid, there are no benefits based on the extra pay, and next year we will still be looking at the same amount (no compounding effect like you get with percentage raises) when it comes time for merit adjustments again.

    Though the employee is not as well off as if we had given them a raise, lump sum payments go a long ways towards keeping the employees happy and motivated.

    Good luck!


  • The lump sum payment is an excellent idea, NaeNae, I may steal that one if you don't mind. x:D

    Can you say more? For example, you say it may not be the same as the raise they might have gotten. How do you compute the lump sum payment? Does this happen often in a given year?
  • It depends upon the employee, but the most we ever give is the equivelant of what the raise would have been. That is, if someone is earning $40,000 and we are giving 3% raises, we might give them as much as $1,200, but NEVER more.

    Even if we give the full amount, we have saved on life insurance, 401k, etc. And next year the person is still looking at $40,000 with a max of $1,200 lump sum payment. If we had given them a raise, a 3% increase would now be worth $1,236. It isn't alot to the one person, but it adds up over time for the company.

    We went through a spell where about 20-25% of our employees got lump sum payments a few years back. We are better at looking at the market now and haven't had it happen for several years. We had one employee who only got a few cents raise last year because of the max, but that employee was lucky to get anything and is now gone.

    (BTW, our managers who are also officers of the company have wages set by the board. Everyone else has a range.)

    Good luck!

  • We too have max rates for all posiitons except what we consider our Sr. Management positions, (Sr. V.P, Ex. VP, President, COO and CEO). The salaries for our Sr. Mgmt Positions are set by our Board of Directors. You might consider when you rewrite your max. rates that you do not include Sr. Mgmt positions in these, if this would work for your line of business.
    Good luck
  • [font size="1" color="#FF0000"]LAST EDITED ON 01-05-07 AT 02:17PM (CST)[/font][br][br]If you haven't updated your salary structure recently, why don't you go ahead and adjust it now? You really don't need a formal compensation study to simply adjust your structure to take into consideration cost of living increases/inflationary issues, etc. Adjust your structure to reflect, say a 3-5% increase to your ranges, and adjust your midpoints, maximums and minimums accordingly. It is not unusual to adhere to a "lead-lag" compensation philosophy where you make no adjustments to your structure one year ("lag"), then the followiong year you adjust your structure with a 5-7% increase ("lead"), assuming your merit raises are averaging around 3-3.5% increases. I would think that an upper level executive that is performing at a high level would certainly justify either the previously recommended lump-sum in lieu of a salary increase, or an adjustment to your salary structure to accomodate the increase, even if you just adjusted the salary ranges for upper level posistions. Formal compensation data and salary survey results should only be considered benchmarks and shouldn't dictate how your company should compensate its best talent. If you need to make some minor adjustments to reward your top talent, don't let the absence of a "compensation study" handcuff you.
  • I do adjust the ranges every year, actually, but the CPI for urban workers in the Northeast region. This has historically been between 1.5 and 3%, not very much. Do others use a different reference point? the CPI website does provide something called "inflation" but it's not clear to me what that is.

  • I think everyone has said it.
    I would first look at the employee's job. Has it changed, responsibilities increased, etc. (Don't look at how the employee has performed, but what the job requires.) You may need to reclass the job, up and/or down.
    Second, I would look at the salary ranges, which was mentioned.
    Third, if these don't change and you still want to do something, I would do the bonus. (I like the idea of the "lump sum payment' that was mentioned, but what it is is actually a bonus with a different name.
    I would also review your policy.
    The last thing I would do is "make an exception". This opens a can of worms.
    E Wart
  • We do the same as Nae Nae. Executive management does not have a salary range; their salaries are driven by the market and their performance. Increases are approved by the Board.

    We have had instances of employees being granted increases that put them above the maximum. At this point, their salary is frozen until the range increase (if any) catches up with their salary.

    Hope this helps.
Sign In or Register to comment.