Red Circle employees indicate you are spending too much on compensation relative to the value of the jobs, says consultant Terry Pasteris, CCP, GRP, but Green Circles may set you up for a lawsuit. Pasteris’s comments came at a recent BLR-sponsored webinar.
Red Circle employees are those who are paid over the maximum for the range established for their positions. They are paid more than the job is worth to the company, says Pasteris, who is president of TLMP Consulting Group.
There are a number of ways employees can become red circled, but the primary reason is that they have been in the job a long time and just keep getting raises that are higher than the increases to the range. If the ranges are well set and track the market regularly, red circles may indicate a lack of discipline in managing the system, says Pasteris. Managers just aren’t being tough about following increase guidelines.
Red Circles aren’t dangers to the company except that they are digging into profits. Green Circles are another story.
Green Circles are those who are paid under the minimum for the range. This typically happens when someone is promoted from a much lower position and you don’t want to give a huge raise of say, 20 percent or 30 percent.
Generally, Green Circles have the potential to cause legal problems. If the Green Circle employee is a member of a protected group, the Green Circle status could look like discrimination and subject the company to litigation, especially if others in the same job are all paid in the range.
Comp Metrics—Key to monitoring and improving your compensation program. Attend BLR’s interactive webinar, Compensation Metrics: How to Gather and Calculate Key Data so You Can Pay Appropriately. Join us October 25, 2013. Learn More
You Shouldn’t Have Red and Green Circles … But
Generally, if the system is working right, you shouldn’t have any of these; however, says Pasteris, that’s not the way it works in the real world. You probably should address Green Circles immediately. At a minimum, have a plan to deal with them, says Pasteris.
With Red Circles, what you do depends on the reason for the high pay rate. If it is the result of a reorganization or reclassification of good performing employees, you may tolerate the situation for a while.
Our Compa-ratio is 109
What if you have a very high compa-ratio like 109? asks Pasteris. That would mean that you are paying nearly 10 percent higher than your system says you should.
But take a look at tenure and age and other factors. For example, if your market positioning is where you want it (say, your strategy is to pay at the 75th percentile and you are paying at the 75th percentile), and you have a preponderance of long-term, seasoned employees, and your turnover is zero—that all fits together into an OK package, says Pasteris.
But it is a generous program, she concludes.
Comp metric are critical for evaluating and justifying your program, but it’s often hard to know which metrics to use, how to calculate them, and what “good” number look like.
Need help? Join Pasteris for an informative webinar on October 25, when she’ll discuss the key types of metrics to use when you’re trying to determine whether your ranges ratios, and practices are appropriate.
In just 90 minutes, you’ll learn the metrics you need—and how to interpret them—to be sure your compensation program is optimized. Register today for this informative event risk free.
By participating in this interactive webcast, you’ll learn:
- The most useful compensation metrics for managing your organization’s compensation plan
- How to accurately calculate salary range penetration and compa ratio
- How to review employees’ compensation within a given salary range can help you zero in on whether your salary ranges are too wide or too narrow
- Best practices for using compensation metrics to determine if you’re paying at, above, or below the market target
- Key questions you should be asking about your pay practices and overall compensation philosophy once you’ve gathered your data
- Plus our expert answers your specific questions!
Register now for this event risk-free.
Wednesday, October 25, 2013, 2013
1:30 p.m. to 3:00 p.m. (Eastern)
12:30 p.m. to 2:00 p.m. (Central)
11:30 a.m. to 1:00 p.m. (Mountain)
10:30 a.m. to 12:00 p.m. (Pacific)
Approved for Recertification Credit
This program has been approved for 1.5 recertification credit hours toward PHR and SPHR recertification through the Human Resource Certification Institute (HRCI).
Join us on October 25—you’ll get the in-depth Compensation Metrics webcast AND you’ll get all of your particular questions answered by our experts.
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If you are not completely satisfied after attending an BLR event, let us know, and we will refund 100% of your registration fee — no questions asked.
Metrics not telling the story? Fortunately there’s timely help in the form of BLR’s October 25 webcast— Compensation Metrics: How to Gather and Calculate Key Data so You Can Pay Appropriately. In just 90 minutes, you’ll learn which metrics work and how to calculate and present them. Register today
Train Your Entire Staff
As with all BLR/HRhero webcasts:
- Train all the staff you can fit around a conference phone.
- You can get your (and their) specific phoned-in or emailed questions answered in Q&A sessions that follow each segment of the presentation.
Your Expert Speaker
Terry Pasteris is president of TLMP Consulting Group. Prior to founding TLMP, Ms. Pasteris led global compensation functions in several corporations and has consulting experience including Partner and Vice President of the Hay Group. Ms. Pasteris’ work covers all areas of rewards at executive, sales, and all employee levels, both domestic and international. She is a CCP and GRP and holds an M.A. and a B.S. from the University of Illinois at Urbana.