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Part 5 | Should every employee always receive a raise?
Part 5 of the Executive Series: Compensation Strategy in Vietnam — Essential Insights for Business Leaders
In a good number of organizations, annual salary increases are often applied as a default — even for employees who have already reached the top of their salary range. While well-intentioned, this practice creates long-term issues with pay equity, internal consistency, and cost control.
Without a clear policy or framework, managers are left making case-by-case decisions — which can lead to inconsistency and misaligned compensation practices.
In this article, we provide a practical approach to managing salary increases for employees who are at or near the top of their salary band, while maintaining fairness and controlling labor costs.
Why it matters: How salary ceilings impact pay structure, cost, and fairness
When employees reach the top of their salary range, further increases to base pay can have significant implications. They may:
- Exceed the established compensation framework
- Increase long-term fixed labor costs
- Create internal equity concerns among peers at the same level
To navigate this effectively, organizations should avoid a one-size-fits-all approach to pay increases. Instead, it’s important to understand why an employee has reached their ceiling and apply a structured, scenario-based response.
Below are four common situations HR teams often face — and how to handle them strategically.
Four common scenarios and recommended HR actions
Scenario 1: High performance and ready for promotion
Situation: The employee exceeds expectations and is qualified for a higher role.
Action: Promote them to the next grade with a new salary range.
This not only enables future increases, but also reinforces performance-based progression.
Scenario 2: High performance, but no promotion opportunity available
Situation: The employee qualifies for promotion, but there is no open position at the next level.
Actions:
- Review workforce planning: Are the number and structure of upper-level positions truly appropriate for promotion opportunities?
- Revisit career paths: Introduce non-managerial tracks—such as expert or specialist roles—to allow advancement to higher grades even when managerial positions are limited.
- Reevaluate the upper limits of your salary bands—if top performers are hitting the cap too quickly, the range itself may be set too low.
Scenario 3: Growth potential appears limited for now; maintain within current grade level
Situation: Current role is considered appropriate for the foreseeable future.
Action: Apply a structured, limited increase model:
- S rating = 75% of standard raise
- A rating = 50% of standard raise
- B rating = 25% of standard raise
- C rating or below = 0% of standard raise (=no raise)
This allows for performance differentiation, while respecting salary range limits.
Scenario 4: High potential, but not yet promotion-ready
Situation: The employee shows potential, but current performance does not yet meet promotion criteria.
Action: Similarly as in scenario 3, maintain performance-based pay limitations, while setting growth targets with the direct manager to support readiness for the next promotion cycle.
How to maintain motivation for employees who have reached the top of their salary range
Even with the above tactics, some employees will remain at the top of their range for extended periods. That makes it essential to manage perceived fairness and motivation — especially for good performers.
Here are three approaches that help protect morale without distorting your compensation structure:
Option 1: Continue base salary increases within a flexible range
Treat salary ranges not as rigid limits, but as general guidelines that allow for a degree of flexibility.
This approach supports modest base salary increases even at the top of the range, helping to sustain motivation—particularly for high-performing employees—while keeping overall growth controlled.
Option 2: Offer bonuses instead of salary increases
Keep base salaries within the defined range, but reward strong performance with additional bonuses or one-time payments equal to what a raise would have been.
This way, you can recognize contributions without increasing long-term payroll costs. It also gives you more control over your compensation budget.
Option 3: Use special allowances outside of base pay
Pay the amount above the salary range as a separate allowance—like a market adjustment or special recognition payment—not added to base salary.
These payments should be clearly separated from regular pay and excluded from future raise or bonus calculations.
Important: Use this approach carefully. Overusing special allowances can reduce transparency and make your pay system harder to manage.
Final Thought: Manage Ceilings with Strategy — Not Emotion
When employees reach the top of their salary range, the goal is not to decide “yes” or “no” to a raise — but rather to implement consistent, well-defined, and data-informed actions that support performance, engagement, and fiscal sustainability.
Having a structured framework in place helps HR and business leaders protect both internal pay governance and long-term talent retention.
Start with market insights
To make informed decisions — especially for employees at or near the top of their range — it’s essential to understand how your pay structure compares to the market.
Participate in the 2025 Vietnam Salary Survey to access:
- Competitive salary and pay range data by role and industry
- Trends in raise practices and ceiling pressures across sectors
- Benchmarking insights to guide fair and consistent decisions
Participating companies will receive a complimentary executive summary of the latest Vietnam labor market trends.
📍Coming Up in Part 6:
“How to Use Salary Benchmark Data: Key Sources and Their Characteristics”
“Is our compensation level reasonable compared to the market?”
When this question arises, salary benchmark reports can be an invaluable reference.
In the next edition, we’ll take a neutral look at the most commonly used salary data sources available in Vietnam, explore their unique features, and explain how to use them effectively depending on your objective.
👉 Stay informed. Stay competitive.
