Ask an Expert: Salary Caps

  • September 5, 2023

How can we retain an employee who has reached the top of the pay scale?

By Theresa Adams, SHRM-SCP | May 31, 2023

pexels-elevate-digital-1647905Employees who are earning the maximum compensation for their pay range are often highly valued top performers, and retaining them in today’s competitive market is a challenging business imperative. Because an employee hitting the pay ceiling can be anticipated, it’s good practice to discuss career paths with them well before they reach that point.

Start by ensuring that the employee understands the big picture. Being transparent with employees will improve trust, which can boost retention. Communicate the compensation practices of the organization, including how salary ranges are developed and how pay increases are decided. Review your organization’s compensation philosophy, as it is an important tool not only for guiding pay decisions but also for communicating the reasons behind those decisions. You might then segue to talking about the total rewards the company offers.

While an employer can do several things to improve its chances of retaining an employee who has reached the top of the pay scale, it’s critical to have a thoughtful, strategic approach that aligns with the employee’s interests and values, as well as the company’s culture.

Below are several examples of steps an employer can take in this situation:

  • Provide a lump-sum bonus instead of a pay increase. This provides additional compensation and recognition but keeps an employee within the salary range.
  • Provide opportunities to advance. Offer stretch assignments, cross-training, and learning and development benefits that fit the employee’s career interests and the employer’s needs.
  • Develop plans for numerous different career paths that allow the employee to move either vertically or horizontally within the company.
  • Offer other non-monetary benefits, such as flexible work arrangements, additional paid time off, opportunities to train other employees in their functional area, or the ability to attend a work conference at a desirable location.
  • Recognize an employee’s contributions by providing regular feedback, recognition and other positive forms of reinforcement.

In general, it’s a good idea to review pay structures on a regular basis to ensure that all employees are paid at levels comparable to those for similar positions in the market.

Ultimately, retaining employees in a volatile market is critical regardless of where they are in the pay range for their position. Developing an open and transparent culture, offering competitive pay and benefits, and rewarding employees fairly will help improve employee retention.

Theresa Adams, SHRM-SCP, is a senior HR Knowledge Advisor for SHRM.

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