Today in the corporate world, most employees will expect employee benefits and salary increases over time. The wages they are paid should ideally be in line with inflation, and is a way of rewarding them for good work. However, figuring out the proper amount can be tricky. An employer should take into consideration their morale, schedule market averages, and their performance.
Assessing The Compensation Package
When deciding how to increase the salary of your employees, you should reference the compensation package you offer them. A lawyer should also be on hand to assist in their process, as they will ensure you’re operating within the confines of the law. You will also receive the latest information on average market salaries for your industry, and you can analyze the benefits and renegotiate contracts as needed with medical providers, giving your employees a deal which is better. You can also get rid of any benefits your employees aren’t using.
Knowing the retention of your employees is also important. Many will quit if they feel they aren’t being paid adequately, especially when your competitors are offering more. This is why it is so important to provide the correct base salary with regular increases over time to compensate for inflation and the increased cost of living which results from it.
Understanding Market Average
Knowing the market average for your industry is essential to correctly increasing an employee’s salary. Those who are making wages which are beneath the industry average for their position at minimum should be given a raise which places them in the median. Should their salaries already be compatible with the industry average, annual raises should increase along with the market. The best way of deciding the starting salary of a new hire is to make sure it is in accordance with the industry average.
Another concept to pay attention to is payment compression. It involves ensuring that new hires don’t receive the same salary as established employees who have been around for a while. Should your established employees find out that new hires are making the same amount as them, they will often become resentful and upset.
Evaluating The Performance Of Employees
A lot of employers offer raises which are performance based, which is a very good idea. Aside from giving employees an incentive to work harder and smarter, it also gives the employer a positive return on investment, as they know they will receive increased revenues from the funds allocated.
However, performance based raises are best done in conjunction with clocked in hours and employee longevity, meaning the time in which the employee has worked for you. An employee that has worked for a company for 5 years should ideally have a higher pay than someone that has only worked one year. Performance based salary increases should also be made based on quality, not quantity. It is highly recommended to offer two types of raises, one based on the length of time an employee has worked for you and the other based on performance, as this gives employees a double incentive.