Compensating the red-circle employee

Red-circle employees--those who have progressed beyond their pay grade's maximum salary because of merit or tenure--are common in hospitals and represent a challenge to the very purpose of a wage/salary structure. A survey of 18 hospitals in the Southwest indicates five ways in which the problem is currently being handled. 1. 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. 2. No increase. No merit-based or seniority pay raise beyond the maximum is allowed with this approach. 3. Limited or minimal increase. Under this policy, only less-than-regular increases are permitted for red-circle personnel. 4. Lump-sum bonus. With this approach eligible employees receive a cash payment "up front" when a rate change is due. 5. 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. The "no increase" strategy ensures that the institution 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.