Putting a price on an employee’s job can be much more difficult than putting a price on a product or a service.
It might be much easier, in the beginning, to decide on a starting salary, but as employees progress, develop skills, and contribute to the business, it can be difficult to decide what a reasonable salary raise would be, especially as a salary raise is somewhat a physical statement to the value of an employee. This can also determine an employee’s productivity post-raise and the loyalty or motivation which it can spark—or burn down.
With this in mind, this piece will serve as a step by step guide to help a business determine salary raises for their employees.
Check the Current Budget and Pay Practices
It is always best to be prepared in these situations, if not for the protection of agreeing to something the business cannot afford, or something that is not worth the cost.
When employees are propose a salary increase at an appropriate time, it is best to have those numbers figured out in advance, but what about those employees who ask at an earlier time? Knowing if the raise amount proposed can be accepted will go a long way in assisting your employee’s financial needs and also reflects well on the business.
The main point to consider when it comes to salary raises is to keep everything in line, so it is all fair. Newcomers’ and current staff members’ pay need to make sense, and those who take on much more responsibility should be looking at a higher pay bracket.
For a quick and easy way to manage payroll and check the stats, why not invest in HR payroll software that can give much of the data that is necessary to make informed changes.
Define a Job Description as Accurately and Clearly as Possible
Defining a job description makes it much easier to define a wage, and in turn, define the subsequent salary rises. Furthermore, when a job description is ambiguous, it makes it very difficult to compare similar roles with other companies to see what the “going rate” is and if the business can offer something competitive.
Set salary expectations by the core roles of the job, and then inflate the salary raises accordingly.
Decide How to Pay the Salary Increase
Salary increases are often calculated by either a percentage increase or a flat rate. Whichever choice the business opts for is at their discretion, however, methods of how to determine the raise are fairly widespread.
Many businesses actually participate in market surveys based around salary, which helps create a trusted resource for salary research. This research can then be implemented in online salary calculators and other useful tools that can help a business determine a salary raise.
Some will also take into consideration demographic and location factors in order to give a more accurate result. The goal here is to create a salary that makes employees want to stay and motivate them to progress within the company.