Wage Caps

We are coming off a two year wage freeze in November. As part of lifting the wage freeze, we want to restructure our compensation program and implement caps on wages for our supervisors, production, purchasing and IT people. When employees hit the wage cap, their wage would be frozen at that level, but in an effort to keep them motivated, we would give them a performance bonus (although I don't really want to call it a bonus) each year based 50% on their individual performance and 50% based on how well the company is doing. We would monitor those caps each year and adjust as necessary based upon the local wage survey information. I would appreciate your feedback and advise about implementing such a wage structure.


  • 6 Comments sorted by Votes Date Added
  • It sounds like an unnecessarily complicated alternative to sticking to your salary ranges.
  • I used to work for a company that did things a little different. You were not given a raise over your salary range, but if you would have otherwise qualified, you were given a 'Lump Sum Payment.' So, for example, if you made $10/hr and were at the max, and the raise you would have received would have been 3%, you got a check for $624 ($.30 X 2080). That way we rewarded good employees, but kept the salary range in tact. No benefits were paid on the lump sum, and the employee's base wage was the same until a new range was put in force. It seemed a good compromise to me. Employees had an incentive to perform well, and we stayed in budget,
  • When we were giving raises, that is more or less what we did as well.
  • At a former employer we had structured salary ranges with a maximum rate. We discovered that approximately 80% of our supervisors were topped out. In order to address morale, we implemented "non-recurring merit adjustments" (we didn't want to use the term "bonus"). We had a formula (which I can't remember), but it took into account years of service, performance ranking and the employer's ability to pay. Employees loved it. It was a great morale booster.
  • We too have a salary range for each position with a minimum and maximum wage for the position. We use a point factoring system to determine the range for each position. We take a realistic look at the actual minimum requirements for each position. Such as education, prior work experience, sales, lead position, supervisor, skill level for office equipment to be used (from standard to programming), the level of decision making required for the position, and the overall accountability of the position. Once the salary ranges are determined we will review them every two to three years, based upon the local market and make any adjustments that are necessary. If we have someone max out, that is it unless they transfer to a position with a higher cap. We are also in our second year of wage freezes – so we all have high hopes for 2011.
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