By Memory Nguwi
IF you want to attract and retain people who consistently deliver results, you must be deliberate about where you position their pay.
Salary is a strategic decision that shapes behaviour, signals priorities, and influences who stays and who leaves.
When pay is handled carelessly, it creates entitlement, internal resentment, and a wage bill that grows faster than performance. When handled with discipline, it protects your strongest performers and ensures financial prudence.
Many organisations say they pay at market rate, but few define clearly what that means. Market data is presented in percentiles. The 25th percentile means that 25 percent of comparable organisations pay below that level.
The median, also called the 50th percentile, means half of comparable organisations pay below that level and half pay above. The 75th percentile means you are paying more than 75 percent of comparable employers. The 90th percentile places you among the top 10 percent of payers. Understanding these distinctions is essential. Without that clarity, pay positioning becomes arbitrary.
As a general rule, position your overall pay slightly above the market median. This approach creates stability without unnecessary overspending. When your salary structure midpoint sits slightly above the 50th percentile, your consistent performers earn more than at least half of comparable organisations’ pay for similar roles.
That matters in practical terms. Employees compare offers. Recruiters approach them with data. If your organisation consistently pays below the median, you risk losing your current good performers and failing to attract new employees.
Positioning slightly above the median signals a serious commitment to retaining talent. It does not mean you must pay at the top of the market across the board. It means you are not competing at the bottom.
Organisations that deliberately anchor their pay slightly above the median tend to experience lower regrettable turnover among steady performers. They also avoid the constant pressure to react to every external offer with an emergency counteroffer.
However, not every employee should sit in the same market position. One of the most common mistakes organisations make is adjusting everyone to the same percentile when new survey data becomes available.
That approach may appear fair on the surface, but it ignores performance differences. It also wastes money. Pay must reflect contribution. If it does not, high performers feel exploited while low performers feel comfortable. Both outcomes weaken performance culture.
Your consistent high performers should sit around the 75th percentile. These are individuals who reliably meet or exceed targets year after year. They do not require constant supervision. Their output is visible. Their absence would be felt.
Paying such individuals at the upper quartile reduces the risk of losing people who carry a disproportionate share of results. In most organisations, a relatively small group produces a large portion of the value.
This pattern is observable across industries. If you position their pay at the median, you increase the likelihood that competitors will identify and attract them. Paying at the 75th percentile is risk management. It is a calculated decision to protect the drivers of performance.
Only very rare, high-impact individuals should be positioned in the upper decile, meaning the top 10 percent of the market. This category must remain small and clearly defined. These are people with scarce capabilities or critical skills whose exit would materially affect revenue or long-term strategy execution.
They may possess technical expertise that is difficult to replace. They may manage relationships that represent a significant share of income. They may oversee systems where failure would create severe financial or reputational damage.
Paying in the top 10 percent of the market without clear economic justification distorts internal equity and inflates fixed costs. It also creates expectations that are difficult to reverse. The upper decile is not a reward for loyalty or tenure. It is a deliberate investment in roles or individuals whose contribution has measurable strategic weight.
At the other end of the spectrum, employees who are still developing in the role or consistently underperforming should sit closer to the 25th percentile until they demonstrate sustained performance.
This approach is often uncomfortable, but it is necessary for credibility. Paying developing or weak performers at or above the median sends the wrong signal. It suggests that performance is not important. It also reduces the resources available to reward those who consistently deliver.
Movement up the pay range must follow sustained results, not years of service. Tenure does not automatically create value. Many organisations drift into automatic annual increases that are loosely tied to time rather than contribution.
Over time, this disconnects pay from performance and increases payroll without improving outcomes. A disciplined pay positioning model requires clear performance standards, credible evaluation processes, and managerial courage. Without those elements, salary differentiation becomes political rather than performance-driven.
This structured approach allocates payroll where it produces the highest return. It rewards sustained contribution, protects against unnecessary attrition, and ensures that salary budgets are deployed with care. It also strengthens internal fairness. Employees may not know exact salary figures, but they understand who delivers. When pay broadly reflects visible contribution, trust increases. When it does not, resentment grows.
There is also a broader strategic benefit. Clear pay positioning allows the organisation to communicate a coherent value proposition to both employees and external stakeholders. You can state with confidence that consistent performers earn above market. You can demonstrate that exceptional performance is recognised.
When compensation reflects sustained performance and measurable impact, it reinforces the behaviours you want repeated. If you want to attract and retain people who deliver results, treat salary positioning as a strategic allocation decision. Position it deliberately. Reward sustained value.
Nguwi is an occupational psychologist, data scientist, speaker and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm.