Pay Adjustments

Recently, I had someone ask me if this scenario is reasonable:

An entry-level employee currently makes 70k.  They have worked for several years and are being promoted to mid-level with a pay adjustment down to the low end of the mid-level band at to 56k.

Yes, you read that correctly.  Being promoted with a significant pay cut.

Now one would think that this is an obvious issue and wouldn’t happen.  Yet, I could think of some situations where this might be appropriate. So let’s detail those first:

    • You are transition from contractor to employee.  Contractors make more because no employer benefits such as insurance.
    • You switch roles dramatically.  There are some roles that have a higher industry payment expectation.  If you move from engineering to administration, you might take a pay cut.
    • The company is doing a wide spread pay adjustments per band (often to avoid layoffs, etc).

None of these applied in this situation.  Let’s unpack some common challenges management face:

    • People are out of alignment in a pay band.  Personally, I’m not a fan of pay bands and this is one of the reasons.  Instead of cutting a salary, I would have a conversation about where they currently sit in the pay band and what that will mean for the next salary review period(s).  I’ve known people to choose to stay at their salary with the understanding that their increases would be small or non-existent to stay in the band.
    • Bands often overlap (one band might go up to 75k and the next band starts at 50k), which can lead to these kinds of situations.
    • Once someone is paid out of the band, action is not always taken.  Lower, might prompt equity adjustments (increases to bring up).  Higher, often gets ignored, which can lead to these kinds of situations.

All this said, expecting someone to increase their workload and responsibilities (with a promotion) and get a pay cut, should not happen…period. This is making someone choose to decline promotion or financially struggle unexpectedly.  Would you take this?  I certainly would not – so I should never expect someone else to accept this situation.

Are there other considerations for this scenario?

 

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