Determining pay raises at the end of the year, or at an employee’s anniversary date, seems to require an increased intake of antacid for many managers and owners. A variety of factors should be considered, and some of those factors are not fully appreciated by the employees. In fact, many employees seem to think that if they haven’t been fired, they automatically deserve a raise….
Here are some factors that could be considered when setting or adjusting pay levels:
- Current pay level for this job compared to other jobs in the operation.
- Pay level required to attract (and keep) a person with the necessary skills compared to similar jobs they could have in the area.
- Adherence to established rules and procedures
- Ability to reach production goals
- History of ability to do the job
- Attendance
- Efficiency and time management
- Consistency of performance
- Decision-making ability
- Respect for authority
- Lack of mistakes or “expensive” errors
- Annual inflation rate/cost of living in your local area.
- Attitude
- Dependability
- Willingness to help others
- Trainability/willingness to learn
- Communication and training abilities
- Loyalty to the company, the management and the ownership
- Flexibility
- Working as a team player
- Development of skills over time
- Cooperativeness
As you can see, some of these factors are easily measurable, while others are more subjective. Results of annual performance reviews will typically contain many of these factors as well as additional measurable items, and should be included in the compensation review.
When doing compensation reviews, it is not necessary to explain to the employee every factor that went in to your decision, but you should have identifiable reasons for making your decisions. Be certain that your reasons are consistent for all employees, and that employees with very similar levels of performance, attitude, skills and tenure receive similar adjustments to their compensation to avoid claims of discrimination or inequity.
