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5 Replies Latest reply: Jun 2, 2008 5:27 PM by SBC Team RSS

What is an appropriate pay raise percentage for employees

miles333 Newbie
Currently Being Moderated
I have a small/mid size business (20 people) and would like to know:
1) Is there a nation wide average of pay raise percentages for certain business?
2) What does everybody in this forum think the appropriate pay raise percentage for employees should be?
3) How often should we give the raise?
4) What is the nation wide average on how often raises are given?

Your feedback is greatly appreciated.
  • Re: What is an appropriate pay raise percentage for employees
    MRFINANCE Novice
    Currently Being Moderated
    When I worked for a large not for profit company we would get raises once a year with a performance review, of about 3%. It seemed fair except that it didn't offer much incentive to work harder.

     

    Joe
  • Re: What is an appropriate pay raise percentage for employees
    Lighthouse24 Master
    Currently Being Moderated

    In my view, all employees should receive a periodic (annual) pay raise in an amount that allows them to keep pace with the cost of living. Staying with an employer should never mean that someone's standard of living goes down every year (and yet that is often the case).

    That said, you should never offer a regularly scheduled increase for anything else. Additional compensation should only come with: (a) acceptance of more responsibility, (b) demonstration of greater competence, or (c) direct contributions to revenue.

    In any business, there is a practical limit to what you can pay for a given job. If someone wants to earn more than that, it should be understood that he/she will need to learn an additional skill -- and then use that skill to (1) make your company more money, (2) take over a job that is currently being outsourced (and that currently costs you more money than it would if your own employee could do it in-house), or (3) assume part of the owner's or manager's job (freeing you up to expand your business and make more money).

    Employees deserve (and need) to keep pace with the cost of living. You risk losing good people if you don't provide cost-of-living increases -- because it's your best employees who can most easily find jobs elsewhere, and will therefore job hop for more money (leaving you with the people who no one else wants to hire).

    Beyond that annual adjustment, if a person isn't doing more than he/she was a year ago, isn't doing it measurably better than a year ago, and isn't directly making you more money -- then he or she is being paid the right amount. If you have employees who don't want to do more or do it better, then they can probably be replaced (should they quit) without a huge impact.

    When people are doing much more and doing it much better, your business will be making much more money -- so be sure to reward those workers accordingly.

    Hope this helps. Welcome to the community and best wishes.
  • Re: What is an appropriate pay raise percentage for employees
    LUCKIEST Master
    Currently Being Moderated
    What is an appropriate pay raise, Welcome to this web site

    Good question. Lighthouse always has great answers.
    To answer your questions, I would also like to know more. What is your Title??
    Like how long have you been in business?? Where are you located??
    Do you have an Accountant?? and is the company making money??
    How is your Cash Flow?? Where do you see the company in 3 years??
    To me knowing what the nation wide average has NO Meaning. You have employees.
    If they are going a great job and making you BIG monies, it would be better to reward
    them than paying profits to the IRS. That is why I asked about an accountant.
    Go to Members page and tell us more.

    LUCKIEST
  • Re: What is an appropriate pay raise percentage for employees
    NatOnline Expert
    Currently Being Moderated
    If I had let's say 20 employees, I will give a raise of 2% every 6 months and a bonus before Christmas :)

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