Salary Increase Planning

Participation Rate

Some companies manage salary reviews by employee group (e.g., executive, hourly, salaried). An employment contract for unionized employees will typically dictate the type and timing of salary increase for eligible employees. Another decision is whether this increase covers only core employees or includes contingent employees as well.

Should Increases be General or Merit?

The increase in pay may be distributed in a number of ways.

There are general increases to all employees and merit increases to individual employees:

• General flat increase. A flat increase provides the same fixed amount to all employees participating in the salary increase. Over time, this will decrease the "distance" between compensation levels among employees in the organization.
• General percentage increase. This type of general increase grants a fixed percentage increase to all employees. This is the most common type of general increase. This will maintain the distance between jobs in the organization.
• Merit increase by employee group. This type of merit budget may vary by employee group (for example, administrative/operative, professional/management, executive). Although many companies budget consistently throughout an organization, jobs that are in higher demand may require higher budgets than others. In this case, the higher the level of a job in the organization, the higher the percentage of merit increase that is budgeted. Increases are then administered by employee based on performance attainment.
• Merit increase by country. A best practice for multi-national corporations is set salary increase budgets by country. The market movement of salaries vary by country, and this approach reflects the actual marketplace. Increases may then be administered within each country's budget based upon employee group (if applicable) and then performance attainment.
• Contractual Requirements by Country: Certain countries also dictate participation rate in salary reviews. For example, be aware of unique requirements in countries such as Belgium, Brazil, and Italy where contractual requirements for salary increases may apply.