Red Circle and Green Circle Employees: Meaning and How to Handle Them

When you first compare real salaries against a new salary structure, two groups stand out: people paid above their range, and people paid below it. They are usually called red circle and green circle employees. This guide explains both and how to handle each.

Definitions

• Red circle: base pay is above the maximum of the range for the grade.
• Green circle: base pay is below the minimum of the range for the grade.

Everyone else is inside the range. Being inside the range does not mean the pay is right, but the two circle groups need a decision first because they sit outside the rules.

Why red circles happen

• A salary structure was introduced or changed and existing pay did not fit.
• An employee was moved to a lower grade or the role was re-evaluated downward.
• A hire was made above range to win a candidate in a tight market.
• Long tenure with regular raises and no promotion pushed pay to the ceiling.

Why green circles happen

• A promotion placed someone in a higher grade without enough of a pay move.
• The new range minimum is above what the person earns today.
• The starting salary was low and later raises did not catch up.

Handling red circles

1. Confirm the facts first. Check the grade is right before treating the pay as the problem. Sometimes the role has grown and the grade should change.
2. Choose a policy you can repeat. Common choices:
   • Freeze base pay until the range catches up.
   • Pay future increases as one-time lump sums that do not add to base.
   • Move the person to a higher grade if the work now justifies it.
3. Explain early. Employees who hear it from their manager with a clear reason take it better than those who find out from a spreadsheet.

Reducing someone’s pay is a legal and relationship risk. Check with your legal adviser before any reduction.

Handling green circles

1. Check the data. A person far below minimum could be a grading mistake.
2. Prioritize. Start with the largest gaps and the strongest performers.
3. Phase it. Bring pay up to the minimum over one or more cycles, within budget. State the plan so the employee knows the intent.

Prevent the next circle

Circles keep returning when ranges are not reviewed. Re-check ranges against the market on a fixed schedule, and track each person’s position with a measure like compa-ratio.

If you want to see your own red and green circle groups on one screen, Pay Compass is built for that view, and our salary structure service sets up the ranges it compares against. A first conversation is free. Background reading: what a salary structure is.