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Dos & Don'ts
"Can you pay employees different amounts of pay, even if their performance is similar?"
(Answer provided at the end of the newsletter.)
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Average Merit Raise for 2013
Before the Great Recession, average base pay raises reached 5%. Immediately after the recession, pay increases were 2% - 2.5%. In 2013, raises will average around 3% which is slightly above recent years. While the forecast for 2013 is still relatively low, it's expected to outpace inflation estimated at about 2%.
Three percent raises are the new normal, says Ravin Jesuthasan, a compensation expert and managing director with management consulting firm Towers Watson. "I don't think anyone should expect merit increases to deviate that much going forward, even if the economy does well."
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4 Types of Variable Compensation
Employees must now earn their pay increases. "There's been a transformation in how employers think about rewarding employees," said Catherine Hartmann, a principal at Mercer, a global HR consulting firm.
As earnings at many businesses improve, companies are spending more on variable compensation. Thus, next year workers might expect to see bonuses or other monetary incentives instead of merit raises. Employers have greater flexibility to adjust pay based on their financial results by offering the following:
Bonuses: Based on team or company performance
Commissions: Based on individual performance
Other Incentives: Examples include incentive trips or more vacation days
Health Insurance: Some employers might consider covering health care premium increases in lieu of pay increases.
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Safari Interview Tip New hires might expect comparable pay increases offered by their previous employer, particularly if the candidate is a star performer. Be sure to ask about past three year compensation (detailed by category) before hiring, so you'll have a general idea of their future expectations.
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Answer to Today's Dos & Don'ts
"Can you pay employees different amounts of pay, even if their performance is similar?"
Answer:
Yes, you can pay employees differently in the same role for any of the following reasons: Education difference, Experience difference, and Performance difference. If some employees are performing different functions or responsibilities, it is always best to give those employees a different title rather than trying to pay them different in the same title for different responsibilities. (Source: Cassandra Faurote, Total Reward Solutions)
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