Contributed Column

Personnel Points

by Dave Mount, Westaff

Salary administration — the time is now

The Vermont Legislature is considering, and will probably pass, a bill prohibiting employers from asking salary history on an employment application. It will also probably make it more difficult to discuss it in an interview. This is to eliminate disparities between the sexes in salary.

As an owner, the best way to deal with any new rules that come from this is to have a good salary administration policy in place. When you are filling a particular position, the salary structure of the company is the guide, not the prior earnings of the individual you are interviewing. By making the salary known to a prospective employee, the opportunities for misunderstanding are reduced. Before taking time in an interview, an applicant knows that “this job pays X per year and our benefits are Y. Does this work for you?” If it does not, move on to another applicant.

Establishing the salary structure is not difficult, and companies with few employees can do it just as easily as those with more.

We established a salary structure at our company about 15 years ago, and we have never looked back. It was a great move, and it simplified the way we worked.

We had several offices throughout the region, but we had many people doing the same thing. We listed those people and then listed their salaries. That is step one. When you do this, you may notice some interesting discrepancies. We want to minimize these. When you’re finished, you can show the salaries from low to high on a grid. That is your range for a particular position. Also calculate the average salary for each category. That becomes the midpoint.

Most companies set a minimum and maximum salary for each category they have. Using the midpoint as a base, the minimum salary should be 20 percent below the midpoint and the maximum 20 percent above. The 20 percent is somewhat arbitrary, so a company might want to tighten up on the salary structure and make the number 10 percent. That is purely a company decision.

At this point, you should evaluate the people in the position relative to your newly established structure. Someone may fall below the established minimum and you should move to correct it if you are certain the person is classified correctly. Others may fall above the established maximum. These are harder to deal with but the system was never meant to penalize someone. People over the maximum are referred to in HR literature as being “red-circled.” I would speak to red-circled persons and advise that they are over the range for their job. They would not be eligible for an increase (other than, perhaps, a cost of living increase) until they are more in line with their peers.

We had an employee who was very good and was red-circled as being considerably above the maximum we established. We handled the case humanely and continued with minimal increases while the salary fell closer into line with the norm.

The beauty of an organized salary structure is the way it works when you are re-evaluating salaries. The midpoint is your bogie. If the midpoint is, say, $15 per hour and your budget calls for a 3 percent increase, you set the new midpoint at $15.45. You then look at your matrix again, noting if anyone at the lowest end of the scale needs to be adjusted. That gives you the ability to manage other increases within your established structure.

This is a far more focused way to manage salaries than by asking every interviewee for salary expectations. In the end, that is not what matters — it is your expectations of what you should pay people for the job. That way, equal pay will be assured for equal work. •

Dave Mount is the founder of Westaff in Burlington.

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