A red-circled position is held by an employee who is being paid more than the assigned pay scale rate for that position. Sounds great, doesn’t it? Well, not so much. Read on.
In the Canadian public service, a position is sometimes reclassified or converted to a group or level with a lower maximum rate of pay. Since it would clearly be unfair to reduce an employee’s pay, the employee retains his or her former pay level – called a “holding rate” – but no longer receives the regular pay increments of the old position, until the pay level and increments of the new position “catch up”. Meanwhile, the position he/she holds is “red-circled”.
The term is an official one. The Treasury Board website even helpfully provides the bilingual equivalent: “poste bloqué”. While nominally designed to protect the employee’s income, red-circling amounts to a pay freeze due to loss of increments. If the pay scale difference is large enough, the de facto freeze can last a long time and cause an otherwise happy employee to look for another position. Still, in the public service, it is a relatively benign practice.
In the business world, red circling is more sinister. A company that is doing well can be generous with its pay scales, only to discover later that their rivals are paying people less for the same job. Or, demand for a particular skill or trade can decrease and average salaries stagnate, so that, from the company’s point of view their employees are now “overpaid”. There is often little stopping a company – at least a non-unionized one – from red circling entire blocks of positions until the market demand forces them to resume pay increments. If the move brings the salaries affected within industry norms, employees suddenly frozen have no higher-paying place to go. Business school passages on the subject frown upon red circling, not because of its affect on the employees, but because it indicates that the company is poorly run; they have been sloppy in assigning pay, and were “paying the employee more than he is worth”. One business advice website caustically notes that “in better economic conditions, business leaders are often reluctant to deal with these situations”. Other legitimate reasons for a salary freeze, according to that source, include a project completed, a client takes their business elsewhere, or when a company’s leadership “decides to improve upon the current compensation philosophy”. It offers several handy tips on ways to determine if you are over-paying your employees.
There is also such as thing as a green-circling where – you guessed it! – the employee is paid less than the nominal rate for that position. This can occur where an employee is promoted up several ranks at once, but the employer is unwilling to boost the person’s pay by the requisite 20 or 30 percent. This too is frowned upon by the business advice websites. Not, apparently, because an employee is under-paid for new responsibilities, but because it can “cause legal problems” and “could look like discrimination…”. No, really?