Red circles green circles refers to salary of employees either above or below the salary range associated with the job which the employee is the job incumbent.
Some Issues in Compensation
|Red-circled Employees||A job holder who is paid above the salary range set for the job.|
|Green-circled Employees||A job holder who is paid below the range set for the job.|
|Pay compression||A situation in which pay differences among individuals with different levels of experience and performance in the organization becomes small.|
Causes of Red Circles
If the overall staff compensation is well managed, both green-circle and red-circle rates would be fairly uncommon within the organization.
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.Red-circle situations are not dangers to the except that they eat into the business profits.
One of common reason that employees became red-circled is because they had been in the job for a long time (tenure) and management kept giving them raises even if their pay is beyond the salary range, and assuming that the market rate is tracked and the salary range is adjusted on a regular basis.
Other reasons include:
- It is the result of the reorganization of the organization’s entire grade system may result in green circle rates.
- It is the reclassification of good performing employees. The job itself and its duties have been monetarily undervalued up until this point, and that the position requires a new slotting in the grade system in light of the revised pay scale. The position moves up in the grade system, but incumbents’ pay rates don’t change at the same time.
- It is the result of staff been awarded for good merits such as superior treatment of a spectacular performer.
Causes of Green Circles
One reason that an employee is green-circled is that he could have been hired at a salary that was much lower than the salary range minimum.
Another reason is when someone is promoted from a much lower position and management do not want to give the person a huge pay raise, such as 20 percent or 30 percent. This means that an individual who has been upgraded to a new job or job tier may have a title that reflects this promotion, but a salary which as of yet does not.
In the situation where green-circled employees are members of a protected group, such as union members, when salary ranges had been agreed in the collective agreement, the green circle status could look like discrimination and subject the organization to litigation, especially if other employees in the same job are all paid in the range.
Some Solutions for Red Circled Employees
- Regular increase. In this approach a red-circle employee receives the same increase as if he or she were not at or above the maximum.
- No increase. No merit-based or seniority pay raise beyond the maximum is allowed with this approach. The “no increase” strategy ensures that the company pays only what the job is worth and makes the most sense in the context of a wage/salary structure. This approach may result in the loss of valued personnel, but such turnover can be minimized if the institution provides employees with the encouragement, training, and development opportunities necessary to qualify for higher positions.
- Freeze salaries until cost of living adjustments to a revised salary range catches up with the employee. This may take years or may never be possible because employees are too far above the new pay range.
- Limited or minimal increase. Under this policy, only less-than-regular increases are permitted for red-circle personnel.
- Lump-sum bonus. With this approach eligible employees receive a cash payment “up front” when a rate change is due.
- Allow employees to train for and transfer into higher paying jobs.
- No established policy. Red-circle situations are handled on a case-by-case basis, with no set approach. Some red-circle employees receive regular increases; others are given limited pay raises or none at all.
Some Solutions for Green Circled Employees
- Immediate increase. With this approach immediately raise the employee’s pay to match the adjusted range in accordance with that individual’s seniority and performance. This would be the preferred method for an organization whose budget is large enough to allow such immediate action.
- Gradual Increase. With this approach gradually raise the individual’s wages to the appropriate level, starting first with an adjustment to bring the employee’s pay to the minimum of the range. This would most likely be the preferred method for an organization whose budget is small.
Compensating the Red Circled Employee
Why Green Circles Occur and What to Do About Them