With annual salary review periods approaching, the Employers Association of New Jersey (EANJ) has provided guidance on how employers can address situations where employees reach or approach the upper limit of their pay ranges. The organization highlights that this is a common scenario and calls for careful consideration to ensure fairness and maintain employee morale.
According to EANJ, when only a few long-term staff members reach the top of their salary bands, it is expected. However, if many employees are at or above the maximum, this may indicate structural issues within the compensation system. The association advises reviewing pay structures regularly and considering market adjustments if needed.
“Often, a well-built compensation system should reward growth, not just time. If your structure doesn’t allow room for employees to develop and move within their range, it may be time for a market review or structural adjustments.”
When salary increases would push an employee beyond the established maximum, EANJ notes that some employers opt for lump-sum bonuses instead of raising base pay. “This lets you recognize strong performance without distorting your pay structure and continually compounding costs. It’s a practical solution, but make sure you explain it clearly.” Lump sums do not affect retirement contributions or other benefits linked to base salary and may have different tax implications.
Employers sometimes distribute these bonuses annually or break them into quarterly or semiannual payments as part of retention strategies. Regardless of approach, consistency and transparency are recommended.
EANJ also suggests considering non-monetary rewards if budgets are tight but cautions against selective offerings that could create perceptions of favoritism: “If you go this route, be sure those options are available across the board. You don’t want to create the perception that only some employees get special treatment.”
The association stresses that exceeding salary ranges should remain rare: “Paying someone above the range should typically be the exception, not the norm.” Regularly surpassing stated maximums signals that pay bands lack meaning; in such cases, updating structures based on current market data is preferable.
Effective communication with affected employees is considered crucial by EANJ: “Let them know they’re at the top of the range, explain what that means, and walk through the options… Being proactive, clear, and honest builds trust.”
“When someone reaches the top of their pay range, it doesn’t have to be a roadblock. It’s a chance to re-evaluate your pay strategy and reinforce what matters to your organization.”
Employers seeking further support are encouraged to contact Cascade—EANJ’s sister association—for additional guidance on compensation matters.
EANJ operates as a nonprofit supporting New Jersey employers with labor relations services including training programs and compliance advice. The organization provides resources such as wage surveys and affirmative action plan development while advocating for business-friendly employment policies throughout New Jersey [source]. Since its establishment in 1916 [source], EANJ has served employers across New Jersey from its headquarters in Livingston [source].
