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Considering Employee Raises? Review These Ideas

December 16, 2019 | posted by Abacus Payroll

Deciding how to administer employee raises can perplex even the most seasoned managers.

How often should raises be given? Should they be given across the board to all workers? If staff turnover is increasing, can you turn back the tide by granting raises to the most productive workers? There’s a lot to consider.

As you create or update your plan for giving out employee raises, here are some ideas to consider:

Merit raises: The pros and cons

You may think that giving everyone the same raise (either percentage or dollar amount) seems impartial and will produce harmony. But there’s a downside. Your top performers — workers who sell more widgets, meet customer demand more often, and maintain a great work ethic in the face of additional responsibility — often leave if they’re recognized the same as employees who show up late, have a bad attitude, or perform poorly. To solve this, consider establishing specific goals along with tiered raises for employees who meet or exceed published goals whenever possible.

Plan your salary budget

Raises mean higher labor costs, expenses that a company’s cash flow must support month after month, year after year. As you create your annual operating budget, incorporate expected labor cost increases.In addition to planning for standard cost-of-living adjustments (COLAs) and performance based wage increases, set aside funds for bonuses, commissions and “spot awards” (lump sum payouts for superior performance). You may also set guidelines for rewarding staff members whom identify operational improvements or generate goodwill in the community.

Reward existing staff first

When companies grow, they often face the prospect of hiring additional staff. If you’re in that enviable position, remember to review your current employees. A business that’s gaining customers and market share may load additional responsibility on existing workers. Plus, your more experienced employees may be asked to train new staff or work longer shifts. This current compensation review is especially important if the job market requires hiring new employees at or above the rates of your current, seasoned staff.

Communicate expectations regularly

Clearly state and routinely emphasize performance goals. Consider separating personal performance discussions with salary action. That way if revenues are down and you’re faced with the tough choice of freezing salaries, there is less chance an individual’s performance will be solely linked to pay. Then you can creatively use incentives and spot awards to reward behavior and ideas that help your business turn the corner.

A highly structured system for granting raises may allow your company to stay within budget, but if your best workers become dissatisfied and leave, labor costs can skyrocket. A well-managed payroll system that rewards great performers on a regular basis and is understood by all employees can be an effective tool to retain workers and help keep morale high.

If you need assistance, Abacus Payroll and our HR resources are here to help you. Fill out our Quote Request form or give us a call at 856.667.6225.



© Business tips are provided by The Alloy Silverstein Group. The business information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.


About the Author: Abacus Payroll

Abacus Payroll, Inc. is a leading provider of payroll solutions for businesses of all sizes. Whether yours is a family-owned small business or a national corporation, we provide payroll, tax and other financial services on time and at an affordable price. Unlike other payroll providers, Abacus Payroll will assign your very own payroll specialist who will understand your payroll needs inside and out. So no more speaking to a different person each time, no more sitting on hold for hours and most importantly no more missed deadlines! Contact us today to see how we can help your business. You can count on us.