Adjusting Pay Ranges to Accommodate Rising Minimum Wage

With a variety of pressures driving minimum wage up, we have been working with several of our clients to adjust their current pay ranges to retain and attract quality personnel. Several of our Arkansas clients have committed to around $13.50 per hour for entry level positions in 2022 and move on up to $15 per hour within the next one to two years.

One of our clients recently adjusted their overall pay range structure for 2022. They sought our advice on how to go ahead and start their entry level positions at $15.00 per hour and what grade levels would be impacted by this change. After running some different scenarios, we were able to provide a recommendation that would only impact the first five pay grades on a 25 pay grade structure. We also tightened up the minimum and maximum pay grade ranges with a minimum of 95%, 91%, 88%, 85% and 83% to midpoint for Grades 1 to 5 respectively, and a maximum of 110% of midpoint for Grades 1 – 3, and 115% for Grades 4 and 5. At Grades 6 and above, the minimum to maximum pay grade range spread returns to 80% – 120%.

The next step after creating this new structure will be for the client to determine the pay adjustments for each employee below the new minimums within their respective pay grade and also review employees in these grades and a few grades above Grade 5 for time in position to handle any pay compression issues arising from the new pay grade range structure.

Whether your organization is still paying the Federal wage minimum of $7.25 or something higher based on state laws, there will be continual pressure to increase your minimum wages. It is important that you establish a fair, equitable and financially affordable pay range structure which may span over a number of years depending on where you are in your marketplace.

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