Looking to Benchmark Pay?
TYPES OF BASE SALARY INCREASES
This course focuses on the first type of pay increase - base salary. We'll look at three ways organizations commonly grant raises:
- Merit pay increases based upon employee or company performance
- General increases or cost-of-living increases
- Other increases which may include internal equity, market adjustments, salary range adjustments, salary progression, lump sum increases, or skill-based pay increases.
Base salary increases are a part of any compensation program. At the very least, an employee expects the organization to review its compensation program on a yearly basis and make salary adjustments.
Base salary increases are typically administered to attain organizational competitiveness and to reward and recognize employees for performance. Increases can be used to recognize greater job responsibilities, too, but typically do not recognize the more significant increase in job responsibilities that comes from a promotion.
A word on promotions:
There are types of salary changes other than those covered by this course.
For example, a promotion occurs when an employee assumes a new or revised job with a significant increase (15% or more) in responsibilities. This usually involves an adjustment of the employee's salary. Most U.S. companies administer a 5-12% base salary increase for a promotion (or more if required to bring an employee up to the new salary range minimum). Stepladder promotional increases are typically less than significant promotions such as from professional to management. Promotional increases may exceed these guidelines when the market supports a higher increase.
This type of salary adjustment is applicable to the individual employee and is not based on a process used to grant adjustments to all employees.
Memory Jogger
Why are promotions not typically considered part of the base salary increase budget?