Business owners should review employee compensation on a regular basis and determine whether employee pay raises are merited. Whether raises are the same across the board, performance-based or calculated using another method, a competitive compensation package is necessary to retain and attract the best employees. Below find a few ways organizations choose to give increases to their employees.
- Across the Board Increase: These are most usually offered once a year, on a designated date, across the board to all hourly employees or those in a specific job classification. This is usually based on the average.
- Length of Service: Hourly raises may also be based on length of service or added job responsibilities.
- Promotions: Pay increases happen to acknowledge a promotion.
- Merit- or Performance-Based: When increases are paid on specific schedules or time frames to reward performance. These are the most common raises that salaried employees receive.
- Company Performance: Some companies base part of employees pay increase on performance but part on company performance, this promotes investment in company success as well as personal achievement.
- Pay Adjustments: A raise can also be offered as an adjustment when it has been determined that an employee is significantly underpaid compared to competitors, other similar employees. These types of adjustments usually require extensive review by conducting salary surveys.
How Much of a Pay Increase Should You Give?
The amount you should give to your employees as a raise will vary depending on the financial health of the company as well as their performance.
- National Average: The average percentage for raises was 3% in 2012, which is considered fair and appropriate.
- Promotional Increase: most companies give between 7-9%.
- Let your Managers Decide: Most companies set budgets for annual merit increases, they assign a specific percentage increases and allow decision makers to divide an overall budget.
- Stock Options: For employees who have been with the company for a long period of time can be awarded stock options in lieu of a pay raise or some combination of a monetary increase along with stock awards.
Ways to Reward Employees without Giving a Raise:
Businesses around the country are financially struggling, we all know this. Unemployment remains high, as a result of businesses either closing their doors or are looking for ways to reduce their overhead. Millions of companies just cannot afford to give their employees raises or bonuses right now, regardless of how much they may deserve one. But, that doesn’t mean you can’t show those employees that their loyalty is not appreciated.
For a full detailed list of ways to reward employees without giving monetary raises, please download “Reward Employees without Giving Raises”.