Merit Increases Today

This past week I attended a WebEx about merit increase guidelines for my staff for fiscal year 2012.  This is the first time my organization offers such training and I was really taken back to hear that we will be receiving a merit increase this year.  My organization, like many others have not offered their employees a merit increase in a few years, if not longer.  It turns out that most organizations are giving anywhere from two to three and a half percent increase in 2012.  The truth is that what your organization should pay in merit increase depends on many factors.  Some factors include, what is going on in your market, what is the demographic of your workforce, and how your organization differs from the norm.

Just looking at the average in your company in your area is not enough.  Say a sales person in the industry may be at three percent.  Even though you are not a sales company but you have staff in sales, you may consider giving the sales staff a three percent merit increase.  If you do not stay competitive, you may fear losing the sales staff.  Earlier in your career there is a positive correlation between higher pay and each additional years of service.  For example a staff member with one year of experience the difference between one year to two years may be up to a four percent but a staff with 15 years of experience the difference in pay with only one more year of experience may just be one percent.  If your organization is performing better than its competitors, it may warrant an increase higher than the average. Also, the average should be based on what organizations are paying competitively with market.

Organizations should establish a compensation philosophy that builds a compensation plan with relevant, timely market data, supports business objectives, and executes increases based on rewarding what your organization values.  This will help the organization stay ahead of being just the average.  For a 2012 Compensation Best Practices Report, go to http://www.payscale.com/hr/default