Salary Increases

What are your current policies on salary increases? Are they done annually? Do employees get an increase after they complete 90 days? What is your average salary increase (percent)?

We currently do salary reviews at 90 days and annually. Plus employees can get increases at anytime during the year for going above and beyond, and taking on additional tasks/responsibilities. Our average increase is 6-8% (for each increase). We have employees who have received total annual increases of 12-18% and now this is what they have come to expect.

Due to these practices, we are getting into pay compression. Our employees are making close to and in some cases more than managers at all levels.

Any input would be appreciated.


  • 14 Comments sorted by Votes Date Added
  • Is it possible you are being too generous?

    We do not give increases at 90 days, though we did before we were purchased by a larger company.

    We give annual raises. An increase amount is set and budgeted. Each department may give more, or less, but the department as a whole must remain budget neutral. Since 1998 those raises have averaged between 2-1/2 and 4-1/2 percent.

    Employees are not given increases mid-year. They are not budgeted. All of our employees are good, hard workers so it is hard to really go above and beyond. If you do, you will get public congratulations. I can't say a bonus will never happen, but it is not our normal business practice.

    Every other year we look at job descriptions and the market. We try to budget for market adjustments, but even if we don't get it right, our employees get what the market gets. That is about the only exception to our policy of staying within budget. Anything over budget has to be explained to our board so we watch it carefully.

    Once employees max their job ranges, that is it. Until there is a market adjustment, they will not get another raise. Since most market adjustments involve an immediate raise, most will still be at their max. We therefore start warning employees when they begin to get close to their max.

    Sorry to wordy. Good luck.

  • tpace,

    x:o 12-18% raises? You might want to take a look at the results from our recent HR Hero Monthly Survey on the topic of raises. Most of the 2,000 respondents are giving raises of 2% to 4% this year.

    Login to the Subscribers Area
    and look for the tiny yellow box in the right column.

    You can filter the survey results to see answers from companies your size, from your state, etc.

    Good luck.

    James Sokolowski
  • This is very excessive for raises and I'm not surprised that you have run into salary compression. Our salary increase for the past 2 years has been 3% and probably will be that again next year if things keep going the way they are. Of course, employees howl about this...but there is only so much an employer can allocate for increases.

    Expectations are very hard to break. I went thru this when I first took my current position. Everyone was a level 5 employee, walked on water and got the maximum allowable increase.

    The upshot of this was we trashed salary evaluations and started giving a flat increase to everyone. appears we may be going back in the direction of giving an increase based on performance evaluation. It will be a job trying to re-implement this and may or may not be to our advantage.
  • We complete an eval at 90 Days but seldom give a wage increase at this time. Our annual wage increases have averaged 2 1/2% to 4% over the past several years. Each job has a min. and max salary range. When and ee hits the max they do not receive a wage increase until the company decides to revisit the max limits, this is usually every 2 to 3 years. I know what you mean by this is what they have come to expect. Give it once and it is a great surprise. Give it twice or more and it is expected every year. This holds true not just for wage increases...
  • Thanks for your input. I am aware of the national average on salary increases. I have been giving this information to our CEO for the past three years as I know our increases are very high; however, I am pretty much told that we need to ensure our employees are happy. Unfortunately, this does not make our employees happy, we have low morale, low productivity, and high turnover.

    If my recommendations were put into place we would limit annual increases to 3% and do more during the year for employee appreciation. This along with several other changes to increase morale and productivity.

    Thanks again.
  • Instead of giving the salary increases for "above and beyond" why don't you just give someone a one-time bonus for this that way they are being thanked for going above and beyond, but not for the rest of their employment.

    Change the level of raises. Use the "one-time bonus" as the thank you. Use this sparingly.

    How are your other benefits? You say you have low morale and you frequently lose employees.
  • We also do one-time bonuses for going above and beyond. The random salary increases throughout the year would be for taking on additional responsiblities, etc.

    We are a small company with 25 employees. Our average salary for non-mgmt is $33,000 (range from $25k to $48k). This is mainly for clerical/data entry type positions.

    We provide group health (we pay 80%), 401k (up to 6% annual match), paid vacation (5 days after one year, 10 days after two, 15 after 5, and 20 after 10), 64 hours annually of PPT, Employee Stock Plan (at no cost to the employee they receive an amount equal to the their avg monthly for the 1st 3 years of employment).
  • Sounds like someone is throwing money/benefits at the employees to make them happy. It isn't working. Money isn't enough. Pleople need genuine respect and affirmation. Sometimes it's the type of work (some jobs are nasty) and sometimes there is one or more persons in management who make people miserable. Management needs to dig deeper to find the solution.

    On the other hand, I once worked for a CEO who was extremely greedy and kept putting raises and benefits into place in order to line his own pocket. He made it a point to take out an employee to lunch every day. It didn't matter who, just some employee. Of course, the company always paid for these lunches. It was just one of his many ways to enrich himself. This was a non-profit organization too. In the end, he sold the employees and the organization's members down the river.

  • First question, do you have any openings in your HR department? :)

    We give a three or six month raise generally and then an annual raise thereafer.

    Last year it was 2.5 percent. This year 2.0 percent. Its set by our board and reflects whether we are meeting budget expectations.

    I was very dissapointed to see the 2.0 percent increase but other than voicing my feelings it was beyond my control. The organization had to tighten its belt and the sense was ee's should share some of the burden.
  • [font size="1" color="#FF0000"]LAST EDITED ON 03-21-06 AT 02:41PM (CST)[/font][br][br]TPACE: We use a pay for performance system. We start our labor folks at $7.00 and hour and after the initial training period of 60 days they can be given a 50 cent per hour raise. This brings the person to a base rate of $7.50 per hour for a journeyman. From here the individual is watched and grown/developed to being the best that he/she can possibly be. Attitude, team player, accomplishments, taking greater responsibilities, and accountability brings the employee to the level of pay among everyone who produces and provides production for the benefit of the team and the company. We evaluate at mid-year and if someone's rate of pay is out of place we will make pay changes as may be appropriate in the eyes of the management team. The end of year December evaluations are like wise used to level the out of place team performer. We have even use a peer rating system as input to the management team to make sure there are no sleeping people out there not performing to the best that they can be.

    The furniture industry in our area of operation is a driving force, because they have high salaries but the seasonal nature of the furniture world of work makes our industry with full benefit equalled to many, so they make our steady income generating, we look pretty good. I have always believed that MONEY is not a long term motivational driving force. Therefore, it must be POSITION, POWER, AND POSITION (authority) that enhances the long term nature of keeping people believing in the work they do and the power generated in knowing my value to the company is continuous recognition of all of my talents and backed with the "fattening the pocket book", which results from my performance and not my long history of just being hear.

    This morning I had to represent the company in an Unemployment case. My boss stepped into my office where I was coaching my supervisor witness with the facts on the case and how the Hearing Officer was going to proceed. MY Boss warned them that they had better not mess up my record over the last 7 years. I have not lost a case! Every time I get a chance to lay out the cost of an attorney to represent us verses my cost, the GM is again made aware of my compensation package. As long as I keep winning, I will continue to be the top awardee for the annual company subjective bonus.

    I vote for the pay for performance and forget about annual increases for everyone just because they lived through the business year. Everyone likes to be recognized as the top dog, but that is a competition that can change daily. Put the company money to work to support the ones who produce the "wigets or the Piglets".

  • tpace, been there done that, feel your pain. It is my belief that you have been more than fair with the increases given your EE's. Our solution to this same problem was this; we implemented "salary ranges" for each position. It took some doing but we determined with input from all departments, supervisors and some outside reference sources what was a fair "range" for each position. The low range obviously being more or less an entry level range and the high range being the maximum range we were willing to compensate any position.

    This does have a down side in that at some point EE's within a position will eventurally reach their high range and will not be able to earn more than a specific amount. The glass being half full however, also indicates that this approach gives us as managers the opportunity to discuss this issue during the review processes over time and encourage EE's to get more training etc., in order to prepare to move up to another position within the company which has a "greater salary range" and thus, greater earning potential. It then puts the majority of the issue on the EE as to whether or not they are motivated enough to continue to advance or do nothing and get maxed out in one position and be "topped out" with regard to compensation in their position.

    Bottom line, some positions simply have to have an earnings cap on them. An employee who does nothing to advance his or her education or increase their job related knowledge should not expect to continue to keep getting pay raises beyone a specified point. We found that for the most part, this only has a negative effect on the EE's who were the constant complainers about all policies and who thought the company owed them something strictly based on tenure.

    The other side of this coin is the "labor" issue which implies that you should always continue to get raises for doing the same thing without regard to increased responsibility or job requirements. In my opinion, that is also unfortunately why we see so many jobs leaving this country. The organzied labor mentality is damaging to both the economy, the workplace and the employees. In the end, we all have the freedom to leave our coveted positions to see if the grass really is greener on the other side.
  • Thanks everyone for your input. I really appreciate it.

    I finally got approval for maximum rate increases of 2% - 4% for 2006. Now if I could only get the managers to give the increases based on actual job performance as it relates to the employees job description.

    I am still working on getting approval for salary ranges, but at this point I am very happy about the budget for increases. I have been trying to get a commitment on this issue for the past three years and always told the same story, that we want to make our employees happy. It is unfortunate that no matter how much data, research, and articles I present, I am made to feel like I am too agressive, or too policy driven, or do not understand what the employees want. I know all to well that money is not the main driving force for happiness and loyalty with employees. All you have to do is look around our office and see the low motivation, low morale, and high turnover.

    Hopefully it will not take another 3 years to get approval for salary ranges.

    Thanks again to everyone who responded.
  • To your point about low morale & productivity coupled with high turnover, have you thought about utilizing exit and environmental surveys to find out why people are leaving and others staying?

    The data from the survey may help bolster your case to the other managers in that it isn't all about money. Respect and relationships have a lot to do with why people stay with a company.
  • tpace - Other than my original response I can't add much more info. I can tell you however, we don't actually have a policy on salary increases. We offer a lot of incentives and bonus plans so we don't routinely adjust base rates and hourly rates. Our average hourly increase is around 6-8% our salaried EE's normally winde with with some sort of new bonus % etc but there is no set policy on them. Our owner is very gracious when it comes to compensation. We DO NOT give new EE's pay increases after 90 days at this place of employment. However, if you go to my original reply to you I was at a different employer then and we DID give new EE's an increase at 90 days. It was usually in the 6-8% range. Annually all EE's received around a 6% increase but there were exceptions + and -. Our salary "ranges" caused some compression but the EE's knew if they wanted more earning potential they needed to get educated in one way or the other to increase their knowledge to be able to move up into another pay range. It really works wonderfully well especially if you offer tuition assistance to your EE's. We were an ESOP company so we encouraged continuing education and upward mobility in all ranges. There is initially some fall out from the "pay ranges" but it is normally from the EE's that don't want to do any more than they have to, to get by, and they also think they should get "longevity" increases. The "pay ranges" system will eventually weed out those EE's that are just along for the ride and very quickly you will find people being very proactive in their rise to another pay range. I hope this information helps you in your quest to gain information to make an informed decision. If I can share further please don't hesitate to ask.
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