A green circled employee is such a job holder who is being paid below the salary which has been set for the job in question. It is one of the most potent problem in compensation management, along with a red-circled employee which is exactly the opposite and hence is a cost for the organisation.
There can be several causes of an employee being green-circled. The most common one is that he was hired at a salary which was much below than the market salary range for the job. Otherwise, there are instances when employees are being promoted directly from very low positions and the management hesitates in giving a huge raise to the employee, which is often to the tune of 30% or more. This implies that such employees are given positions or titles that reflect their promotion, but their salary speaks quite the contrary.
Green circled employees can be a cost to the company if the situation goes out of control. Typically, if such employees are members of a labour union or a protected group wherein the salary ranges are already clearly set down as per terms of a collective agreement, it can be taken up as a clear case of discrimination and the employee may resort to seek legal help.
To prevent facing legal consequences, organisations can resort to one of many options like giving such employee an immediate increase. This will ensure the new compensation now matches the pay range for that particular job cadre and ensures the employee is being compensated in accordance with his level of performance and seniority in the organisation. If there are budgetary constraints, the organisation may resort to a gradual increase in the wages of green-circled employees. The first step in this approach is to bring the wage of all green circled employees to the minimum wage range, which will minimise the number of outliers. This is preferred by organisations with a small budget. In the long run, employees get gradual raises as per market conditions and changes.