Rewarding Sticking Around

“Every year on an employee’s anniversary I give them a pay increase of $1.00 per hour. However, now their pay is getting a little too high for the work they are doing. How do I manage this better?”

Your HR Survival Tip

There is a difference between rewarding employees for sticking around versus rewarding them for their work. Your method is just paying employees for sticking around… and nothing more.

Rewarding employees for taking on more responsibility, helping you reach your goals to grow the business, doing their work faster or better, or learning a new skill makes more sense. When you reward employees this way, your company also does better because your employees are bringing more to their jobs.

For several years, increases were only 2-3%, which is barely noticeable to non-exempt employees and could even tip them into a higher tax bracket, resulting in lower net pay. Tiny increases aren’t viewed favorably by employees overall and barely make a dent in their rising expenses. However, you can’t keep paying more significant increases without eventually overpaying for the job itself.

A raise should never be about the fact that they’ve just stuck around and managed NOT to be fired. Decide if you want to provide merit increases as a reward for doing a great job on a consistent basis or cost of living increases. When the employee is close to hitting the ceiling for the pay range for their job, it’s time to talk about what they can do to be eligible for a higher-level position or a bonus. Once that ceiling is hit, the only change the employee will see is when the entire range increases to stay current with the market.