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Dealing With the Annual Pay Raise

Pay raises are something that your employees look forward to as a reward for doing good work. This type of psychology is built into the minds of many individuals before they even know what a pay raise is. When you were seven you may have cleaned your room because your parents offered ice cream or a day at the park as a reward. Our brains are trained to seek something at the end of tunnel whether or not people say it out loud. Many companies believe in the annual pay raise as a benchmark, while some don’t. There are arguments for both sides.

Structured Raises Create Lost Incentive?

According to SHRM90 percent of companies have a fixed date when employees will receive a raise, if one is granted. The concern is that with this system employee will not have proper motivation to exceed expectations with their work. Many of us have worked in the complacent work environment that can sometimes hinder production. This system can be toxic for the entire office.

Losing Your Employees

Cutting guaranteed raises does have a certain amount of risk. As we said before, 90 percent of employers have guaranteed raises. At what point do you get a disgruntled employee who leaves for a place that they view as a better compensation system? Disgruntled employees are not always the loud one’s, they could be your hardest worker who doesn’t show an ounce of frustration. If your strategy is to save money by cutting annual raises, maybe you should up the perks. More vacation time, frequent half days, holidays off, or a nice Christmas bonus will definitely help.


Performance Bonuses

Maybe the best method is for your management team to develop performance bonuses specific to individual positions. If somebody knows a bonus is at the end of the tunnel they will be very likely to work hard to get that increase of pay. This could also weed out the less valuable employees on your team, leading to an optimal working staff.

Best of luck managing all aspects of the pay raise debate!

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