HR word of the day – Red Circled Employee

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Red Circled Employee refers to a situation where an employee’s is overpaid or his/her pay rate exceeds the maximum salary set for that particular position. Once such employees are identified, organization freezes their salary at the current level. Therefore, this makes the employee not eligible for any increase in the base pay until the maximum range exceeds the employee’s pay rate. Red circle is a very usual approach to addressing situations like these.

It indicates that the organization is spending too much on the compensation of the employees, which exceeds the value they are adding to the organization. It is more expensive than being dangerous. It is paying an employee more than what is the worth of his job to the company.

Have a great HR day 😊