Red-circling and green-circling: pay outside the band
Red-circling is holding an employee's pay above their band maximum, usually after a downgrade or restructure; green-circling is the opposite, paying below the band minimum.
Red-circling is holding an employee's pay above their band maximum, usually after a downgrade or restructure; green-circling is the opposite, paying below the band minimum. Both are formal exceptions: the structure stays intact, the individual case is flagged, and the flag carries a plan for closing the gap.
When each occurs
Red circles typically appear after a regrading exercise, a restructure that shrinks a role, or a structure redesign that lowers a band around an incumbent. Cutting the person's pay to fit would be legally difficult and reputationally worse, so pay is held and frozen instead. Green circles usually appear when a band moves up faster than an incumbent's pay, when a promotion is implemented without the matching increase, or when a structure is applied to a population that was never priced against it.
The discipline that makes circling work
A circle is a transition state, not a destination. Red circles close by freezing pay until the band rises past it, often with review awards paid as lump sums in the interim. Green circles should close quickly, with a dated plan to bring pay to the minimum, because a sustained green circle is a standing pay-equity finding against the employer.
What this means for a comp lead
Count your circles. A handful with closure dates is normal structure maintenance. A growing population of them means the structure no longer fits the market or the organisation, and the fix is a band review, not more exceptions.
Common questions
Pay is frozen rather than cut: the employee keeps their salary but receives no increases until the band catches up with them. Some policies pay review awards as one-off lump sums in the meantime so performance is still recognised without moving base pay further above the maximum.
Rarely a clean one. In the UAE and Saudi, reducing a contractual wage generally requires the employee's written agreement and can trigger disputes, so red-circling with a freeze is usually the lower-risk route to bringing pay back inside the structure.
Sources
- WorldatWork, compensation and Total Rewards glossary
- Armstrong, Handbook of Reward Management Practice (framework only, no verbatim text)
Related
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