If you are curious about how companies and various organizations are determining who will receive a merit increase and why certain employees are granted higher increases, we have the data to answer these questions. The results of the 2017 Salary Budget Report shown here, explore the role that job level plays in the process of distributing merit increases. Find out if executives are given higher merit increases and how this trend is changing over time.
Determining Merit Increases
Merit increases are based on a compensation system that rewards employees for their high quality of work and performance by giving out bonuses, short-term incentives, or a raise in the form of annual compensation. In order to allow this system to work effectively and maintain overall pay budget, mediocre performances made by other employees would receive a smaller raise or no raise or incentive whatsoever. Merit increases can be determined according to job levels, performance, and market-based adjustment. Information drawn from Accompass' 2017 Salary Budget Report: Making Sense of the Market, found a strong negative trend in the amount of organizations setting salary increase according to job levels.
This is What Organizations are Saying
The graph below was extracted from the 2017 Salary Budget Report and indicates that:
- 80% of executives and organizations surveyed do not determine salary increases based on job level
- 20% use job level and title as an indicator of the merit increase an employee will earn
- 45% was the percentage of executives that used job title as an indicator of merit increase in 2016
- 25% is the decrease that occurred between 2016 and 2017 in executives that used job title as an indicator of merit increase
Things Are Changing
There was a clear drop (25%) in the amount of organizations using job level to give out higher merit increases to employees. Market-based adjustments are becoming more relevant in affecting pay budget and compensation expectations. Performance is also a major driving factor in ensuring the compensation strategy of merit increases continues to function effectively. If employees are not being given proper incentive, the merit increase will not serve its purpose to motivate and reward hard-working individuals. If you or your company are looking for more information on compensation strategies and trends, you can find more data in the 2017 Salary Budget Report.