Pay

by Lua Leggett

Pay progression

The rate and limits of progression through pay brackets in a grade or pay structure are typically (though not exclusively) determined by performance ratings. They can be implemented at pay review time or during performance management reviews or at a specific organisation-wide date. Formulae are often used and provided to line managers by HR. Whichever formula is used, it will take account of market analysis and competencies. These can often be expressed in the form of a matrix, which sometimes refers to a person’s ‘compa-ratio’ (short for comparison ratio). A compa rate is usually the mid-point of a scale and represents the market average for a competent individual (see the figure below for a sample matrix).        

As a manager, it is vital to understand your organisation’s formula, so that when a member of staff asks why he is not moving up the pay scale quickly enough, you are well informed. Consequently, you will not only be able to provide the hard facts, but can manage the conversation, which may go something like this:

...you need to be performing in the excellent performance rating before I can put forward a case to HR. Let’s sit down and plan how you are going to achieve that over the next few months. Then, I will happily support your case to HR.

 
Percentage pay increase according to performance rating and position in pay range (compa-ratio)
Rating
Position in pay range
80% – 90% 91% – 100% 101% – 110% 111% – 120%
Excellent 12% 10% 8% 6%
Very effective 10% 8% 6% 4%
Effective 6% 4% 4% 0%
Developing 4% 3% 0% 0%
Ineligible 0% 0% 0% 0%

 

The profession of a prostitute is the only career in which the maximum income is paid to the newest apprentice.

William Booth, Founder of the Salvation Army

One problem that arises is that people can often progress quite quickly through the early stages of this structure. It then becomes difficult for their line manager to explain why this slows down, so that individuals may get smaller increases when they are already performing well and at the top of their scale!

As a line manager faced with a conversation with a mature (nothing to do with age) individual in post, fully competent and at the peak of the pay scale, you will need to go into the interview armed with other rewards or mechanisms to motivate them. This might include ‘acting up’, mentoring more junior or immature individuals in the same role or stretching the individual through job ‘swapping’ or temporary outplacements to get experience elsewhere in the organisation. In addition, you may be able to offer one-off cash payments that are non-consolidated.

Performance-related pay has all the advantages and disadvantages of contingent pay, but many people feel the latter is preferable. The main difficulty in performance-related pay lies not in the mechanism itself (which is in fact very logical, rational and sound), but in the difficulty in managing it! Contribution-related pay schemes are therefore becoming much more popular.