In HR, the term "red circle" is often used to refer to a specific compensation practice known as "red-circling." Red-circling typically involves paying an employee above the established salary range or market rate for their position, resulting in their salary being marked with a red circle on pay scales or charts to indicate that they are outside the normal salary range for their role.
This practice is often employed for various reasons:
- Market Conditions: Sometimes, external labor market conditions can make it challenging to attract or retain qualified individuals for specific roles. In such cases, employers may offer higher salaries (red-circled) to remain competitive.
- Retention: Red-circling can be used as an incentive to retain valuable employees who might otherwise be inclined to leave for higher-paying positions elsewhere.
- Unique Skills or Expertise: Employees with unique skills, expertise, or qualifications that are critical to the organization's success may receive red-circle salaries to recognize their contributions and keep them motivated.
- Tenure: Long-serving employees who have reached the maximum of their pay grade or salary range may have their salaries red-circled as a reward for their loyalty and dedication to the company.
- Mergers and Acquisitions: Red-circling can occur when two organizations merge, and there are disparities in compensation structures. To ensure fairness and minimize disruption, employees from the acquired company may receive red-circle salaries until compensation harmonization occurs.
Overall, red-circling is a compensation strategy that allows organizations to address specific workforce challenges while recognizing the unique contributions of individual employees.
How does it work on HRplus?
For the red-circling to work the user must:
- Set up the Salary Grades and Range.
- Link the Salary Grades to Jobs.
- Enter a Salary Change transaction by selecting the Salary Grade linked to the job of the employee.
- Manually enter a Salary/Rate for the employee.
If the Salary/Rate that was manually entered is either above or below the range that was defined for that grade, then the salary change transaction is marked with a red circle. This is meant to alert the relevant personnel that the employee's salary is outside of the normal range.