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    Key Factors in Determining Salary Increases

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    Salary determinants

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    Key Factors in Determining Salary Increases

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    katusiimejane22
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    Salary determinants

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    Salary determinants

    Copyright:

    © All Rights Reserved
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    Download as docx, pdf, or txt
    10 views3 pages

    Key Factors in Determining Salary Increases

    Uploaded by

    katusiimejane22
    Salary determinants

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Key Factors in Determining Salary Increases

    By HR Daily Advisor Content Team Mar 20, 2014 Benefits and Compensation
    Once you’ve got a salary increase matrix (see below), determining increases should be simple—but
    it’s not.

    Several approaches are commonly used for determining salary increases.

     Performance/merit systems are the most common.


     Across-the-board or general increases are often tied to increases in the cost-of-living index.
     For unionized employees, the collective bargaining agreement will include a negotiated
    provision for wage increases that usually includes a fixed general annual increase that may
    be combined in some instances with merit provisions and cost-of-living escalators that add to
    the across-the-board increase when the cost-of-living index goes up more than a
    predetermined amount.
     Many employers utilize a grid system with low, middle, and high ranges to determine what an
    employee’s wage should be based on job performance and current salary.

    Pay in
    Pay in grade is Pay in grade
    grade near
    near Minimum at Midpoint
    Maximum
    High performance
    7% 6% 5%
    (Top 20%)
    Middle (Middle 70%) 5% 4% 3%
    Low (Bottom 10%) 3% 3% 2%

    Compensation.BLR.com, now thoroughly revved with easier navigation and more complete
    compensation information, will tell you what’s being paid right in your state–or even metropolitan
    area–for hundreds of jobs. Try it at no cost and get a complimentary special report. Read More.

    Factors for Determining Salary Increases


    While job performance is a major factor in any pay raise decision, other factors may be considered
    as well:

     The employer’s overall financial situation.


     The department’s or division’s “budget” for raises.
     The employee’s length of service.
     The employee’s qualifications (i.e., the scarcity of certain talents in the labor market and the
    likelihood that the employee will be paid more for them elsewhere).
     How much other employers in the local area are paying for similar jobs. Employers
    sometimes look to wage surveys of similar organizations within their labor market area for
    guidance in setting or adjusting wage rates. Most employers use “pay budget” surveys rather
    than compensation surveys when comparing their annual increases to those of other
    employers.
     What the employee requires in the way of incentives.
     General economic conditions–the inflation rate, changes in the cost of living, etc. Increases
    in the cost of living should be a major consideration when deciding on a budget for pay
    raises. The primary tool for measuring the cost of living is the Consumer Price Index (CPI),
    which is issued each month by the U.S. Bureau of Labor Statistics. Some organizations have
    an “escalator plan,” which grants employees across-the-board increases in proportion to
    increases in the CPI.

    Bonuses
    Long-service employees with good records who have been ineligible for wage increases because
    they have reached the top of their rate ranges may also be rewarded with bonuses. This practice
    provides employees with an incentive, but does not create red-circled rates. Furthermore, unlike
    increases in base pay, a bonus is not locked in–it doesn’t have to be given year after year. Because
    it’s discretionary on the part of management, it may be given only when the employee’s performance
    warrants it.

    Longevity Increases/Employees at Top Range


    A “longevity increase” is a special pay raise awarded to employees whose pay has been frozen
    because they are at the top of their pay bracket. Companies that give longevity raises sometimes
    stipulate that the employee is eligible for only two or three increases of this type during the entire
    term of the employment.

    When inflation is low or when compensation brackets are not adjusted regularly, longevity increases
    help keep the compensation system in order. If such an option is not available, supervisors may
    artificially upgrade jobs to get pay increases for good workers who have been locked in at the
    maximum for their grade, and this can distort the company’s organizational structure. Longevity
    increases, bonuses, or enhanced benefits are options that can take the pressure off the pay program
    in such circumstances.

    From longevity raises to incentive plan design, compensation is full of challenges. “Maintain internal
    equity and external competitiveness and control turnover, but still meet management’s demands for
    lowered costs.” Heard that one before?
    Many of the professionals we serve find helpful answers to all their compensation questions
    at Compensation.BLR.com®, BLR’s comprehensive compensation website.

    And there’s great news! The site has just been revamped in two important ways. First, compliance
    focus information has been updated to include the latest on COBRA, Lilly Ledbetter, and the FMLA.
    Second, user features are enhanced to make the site even quicker to respond to your particular
    needs, such as:

     Topics Navigator—Lets you drill down by topical areas to get to the right data fast.
     Customizable Home Page—Can be configured to display whatever content you want to see
    most often.
     Menu Navigation—Displays all the main content areas and tools that you need in a simple,
    easy format.
     Quick Links—Enables you to quickly navigate to all the new and updated content areas.

    The services provided by this unique tool include:

     Localized Salary Finder. Based on reliable research among thousands of employers, here
    are pay scales (including 25th, 50th, 75th, and 90th percentiles) for hundreds of commonly
    held jobs, from line worker to president of the company. The data are customized for your
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    on what’s offered in your specific market, not nationally.

    Try BLR’s all-in-one compensation website, Compensation.BLR.com®, and get a complimentary


    special report, Top 100 FLSA Overtime Q&As, no matter what you decide. Find out more.

     State and Federal Wage-Hour and Other Legal Advice. Plain-English explanations of
    wage-hour and other compensation- and benefits-related laws at both federal and state
    levels. “State” means the laws of your state, because the site is customized to your use.
    (Other states can be added at a modest extra charge.)
     Job Descriptions. The website provides them by the hundreds, already written, legally
    reviewed, and compliant with the Americans with Disabilities Act (ADA) mandate that
    essential job functions be separated from those less critical. All descriptions carry
    employment grade levels to current norms—another huge time-saver.
     Merit Increase, Salary, and Benefits Surveys. The service includes the results of three
    surveys a year. Results for exempt and nonexempt employees are reported separately.
     Daily Updates. Comp and benefits news updated daily (as is the whole site).
     “Ask the Experts” Service. E-mail a question to our editors and get a personalized
    response within 3 business days.

    If we sound as if we’re excited about the program, it’s because we are. For about $3 a working day,
    the help it offers to those with compensation responsibilities is enormous.

    This one’s definitely worth a look, which you can get by clicking the link below.

    Click here to get more information or start a no-cost trial and get a complimentary special report!

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