Tag Archives: Annual Reviews

Raises: Time to Move Away From Percentage-Based Increases?

Guest post by Jen Carsen, J.D.
Legal Editor, HR.BLR.com

As we all know, raises tend to come in the form of percentage-based increases for many positions. But this doesn’t mean it’s necessarily the right thing to do.

Shari Dunn of Arthur J. Gallagher & Company suggests it may be time to move away from this practice, noting that a percentage-based approach can be too slow to address inequities in pay. Instead of focusing on the percentage increase, employers should be looking at the resulting pay, Dunn says.

Dunn reports success with an approach that looks at what the ideal pay, which takes into account job value (range midpoint) and performance, would be for an employee at that point in time. This approach requires employers to have jobs classified correctly for determining job value and to have meaningful ways to measure performance.

CalculatorIn this approach, the employer determines the ideal pay by using the performance measurement to calculate how much more than the job value the employee should be paid – and then adjusts the employee’s pay accordingly.

What if the employee is paid at or above the ideal pay? In this case, employers could offer employees an incentive tied to performance or decide whether the individual is a candidate for a promotion.

What do you think? Does this approach sound interesting and/or viable for your organization? Leave your thoughts in the comments!

Dunn and several other great compensation speakers will be presenting at the THRIVE 2016 conference in Las Vegas next month. I will be there, and I’d love to see you there, too! More information about the conference is available here.