What is the best way to determine pay increases for employees?
For most organizations, calculating pay increases are included as part of an annualized budget planning process. On the face of it, budget planning appears to be pretty simple – money in vs. money out. How much money do we have to spend? Where are we going to spend it? What are the revenues? What are the expenses? What is the time frame for the upcoming budget plan? Is there a need for a contingency plan? Suddenly, the appearance of budgeting simplicity starts to become more complicated as we have to go through the assessment of multiple and competing expense priorities.
Paying employees must be at the top of that priority list.
While pay decisions do take affordability into consideration, they must also be aligned with workplace pay increase expectations. This is where the importance of data collection, through salary and compensation surveys, comes into play.
Most employees do have an expectation that their pay will be adjusted in a positive way from year to year. This is highlighted in a recent salary survey which showed that Canadian workers expect to receive a pay increase in this current year (2019) based on a number of variables. Specifically, the survey indicates a 2.8% salary increase is expected in Canadian workplaces.
As we know from our compensation studies, data collection and survey results do provide fact-based evidence that employers can use to make pay decisions. Whether or not the employer can meet the demands arising from survey data sets up another complication in the budget planning process. While employees may expect to see the money, the employer may decide that it can not afford to show it.
- How can these types of survey results influence organizational pay strategy?
- As an employee, how would you justify requesting an annual pay increase in excess of 2.8%?
- From a compensation management perspective, how would you justify giving your employees less than an annual 2.8% wage increase?