The Shift Away From Step Systems
For decades, many organizations, particularly in the public sector, have relied on large, complex step systems like the Government Salary Schedule (GS Schedule). Step systems have long been the ideal for organizations seeking clear-cut, black-and-white pay programs with defined pay growth.
However, more and more organizations are abandoning them. Why?
1. Steps are very cumbersome to administer
With giant grid tables and annual or anniversary-date pay changes, step systems can quickly become incredibly complex to administer and keep up to date. Very large step systems with 10 or more steps per grade can result in hundreds of pay rates to be updated with every budget cycle or cost-of-living adjustment.
2. Step systems obligate you to pay increases
While employees may love receiving an annual step increase, your budgets may not. Step systems often create a feeling of guaranteed movement in the range that may strain financial resources or de-incentivize performance.
3. Step systems can quickly become grey
Step systems are highly appealing for the seemingly black-and-white nature of the system; however, they quickly present obstacles that may drive organizations to work creatively around their own established barriers. Find a great candidate who won’t take your hiring offer? Want to bump up pay for an amazing performer? Need to offer an off-cycle step change to retain an employee? Your step system may hold you back from responding to dynamic market demands.
4. Step systems won’t give you market insight
Step systems are hyper focused on internal consistency, at the cost of external competitiveness. Because step structures are not commonly built around a market aligned midpoint, you may be lost on which step rate matches the external competition.
Ready to step out of your step system?
If your current compensation structure is becoming difficult to manage or limiting your ability to respond to market conditions, it may be time for a change. Our team can help you evaluate your existing pay structure and explore a more flexible, sustainable approach to compensation.
