Menu
HARIK THOMPSON CPAs
  • About
    • Team
      • Patricia Harik
      • Kevin Thompson
    • Affiliation
  • Services & Industries
    • Accounting Services
    • Business Consulting
    • Entertainment Industry
    • Estates and Trusts
    • Financial Planning
    • International Taxation
    • Tax Strategies
  • Insights
  • Resources
  • Payments
  • Contact
  • About
    • Team
      • Patricia Harik
      • Kevin Thompson
    • Affiliation
  • Services & Industries
    • Accounting Services
    • Business Consulting
    • Entertainment Industry
    • Estates and Trusts
    • Financial Planning
    • International Taxation
    • Tax Strategies
  • Insights
  • Resources
  • Payments
  • Contact

How Much of a Raise Should You Give?

6/6/2018

 
​If you run a business with employees, you have at some point wondered how you should compensate them for good work. It's actually a much trickier task than people realize. You have to take into account employee morale, employee performance and market averages. To get a fuller picture of how to fairly distribute raises to your employees, keep reading.
Market level
When deciding how much you should raise your employees' salaries, you should take into account what the market indicates as the average salary for their position. If an employee is making below the average salary for his or her job, a raise should boost them to at least the median income for their job description. If salaries are on par with what the market average is, their yearly raises should reflect the rate at which the market average is increasing. When you hire a new employee, determine their base salary by adhering to the market average.
One thing you need to be aware of is pay compression. When it comes to newer employees versus ones who've been at the company for many years, you want to make sure that, due to inflation, the new hires aren't starting off with a salary that is the same as those of long-standing employees. If seasoned employees find out that a new employee is making as much as they are, they will likely become angry and resentful. In order to avoid this happening, always keep your eye on the market and offer yearly raises to compensate for inflation.
Employee performance
Many employers offer performance-based raises as a means to praise good work and/or motivate employees. While this is a great way to show a hard worker that you value them, it could backfire if you're just offering money as an incentive to work harder. Some people believe that money motivates, but it can also fog their perception. Sometimes the quality of the work suffers because employees are only focused on the raise. In the worst-case scenarios, performance-based raises pit people against each other.
Another way to help you determine employee raises is to conduct yearly performance reviews of employees. This will help employees better understand what you expect out of them and for you to receive feedback on employee morale. The takeaway here is to try to only give raises to employees who've already shown great performance, rather than throwing more money at an employee with a stagnant work performance level because you hope that they'll do better.
Of course, you can implement across-the-board raises for all employees. Although this can help make things fairer, it could have the opposite effect on top performers who deserve a raise the most. If an employee who always goes the extra mile sees that everyone at the company is getting a raise, she or he might conclude that it doesn't matter how hard they work, because they will always be compensated the same way as everyone else.
Review your compensation package
You should routinely review the compensation package you offer employees — and when you do, include consulting with a lawyer in your process. A lawyer can make sure that you're in compliance with certain laws. It's also a good idea to get up to date on what the market indicates the average salaries are. And you need to review the benefits you offer; you can try to renegotiate contracts with health providers to get a better deal, or you can eliminate benefits that your employees aren't taking advantage of. Most importantly, review employee retention. Are they leaving because they're underpaid? Are they going to competitors that pay more? If this is the case, you should definitely address how you distribute raises and what you're offering in terms of base salaries.

Comments are closed.

    Newsletter articles are posted every 2 weeks. ​

    If you would like to have our e-newsletter delivered directly to your inbox, please sign up. Your information is confidential; you can unsubscribe at any time. Subscribe.

    Categories

    All
    1040-X
    1099 Form
    2021 Adjustments
    401Ks And IRAs
    529 College Savings Plans
    941 Form
    ACA Affordable Care
    Accounts Receivables
    ADA Americans With Disabilities Act
    Alternative Minimum Tax
    Annuities
    ASC 606
    Audits
    Back Pay
    Backup Withholding
    Bankruptcy
    Basis
    Benefit Transfers
    Blockchain
    Bonuses
    Budgeting
    Business Closure
    Business Deductions
    Business Interest Expense
    Business Interruption Insurance
    Business Structure
    Business Tips
    Capital Gains
    CARES Act
    Cash And Accrual
    Cash Flow
    Charitable Gifts
    Commercial Real Estate Vacancies
    Communication
    Compensation
    Coronavirus
    Coronavirus Relief Package
    Credit Cards
    Credit Score
    Crowdfunding
    Death And Debt
    Debt
    Deductions
    Depreciation
    Disaster Relief Payments
    Disaster Tax Break
    Diversity Training
    Dividends
    Divorce
    D&O Insurance
    Dollar Cost Averaging
    Down Payment
    Dress For Success
    Earned Income Tax Credit
    Economic Injury Disaster Loan
    Education Credits
    EIN Employee ID Numbers
    EITC
    Elder Mediation
    Employee Direct Deposit
    Employee Leave
    Employee Overpayment
    Employee Ownership
    Employee Pay
    Employee Retention Credit
    Employees Cross State Lines
    Employee Taxes
    Employment Record Keeping
    Employment Taxes
    Entertainers
    ESOP
    Estate Planning
    Estate Taxes
    Estimated Taxes
    Executor
    Expenses And Depreciation
    Expensing Rules
    Family Businesses
    Family Leave
    FATCA
    Federal Excise Tax
    Fiduciary
    Filial (Adult Child) Responsibilities
    Filial Responsibility
    Filing Status Options
    Financial
    Financial Advisor
    Financial Planning
    Flood Insurance
    Floods
    Foreign Earned Income
    Franchise Ownership
    Fraud
    Freelancing
    Furloughs
    Harik Thompson Merger
    Headcount Reporting
    Health Care
    Health Savings Account
    HIPAA
    Hiring Compliance
    Hiring Help
    Hiring Tax Credits
    Hoaxes
    Hobby Vs. Business
    Home Equity Loans
    Home Office Deduction
    Homeowners
    Homeowners' Deductions
    HSA
    Hurricanes
    IC-DISC
    Identity Theft
    Income Tax
    Independent Contractors
    Inflation
    Information Return
    Inherited Mortgage
    Innocent Spouse Rule
    Insurance
    Intestate
    Inventory Management
    Investing
    Investors For Your Business
    IRAs
    IRS CP2000
    IRS Disagreements
    IRS Identity Protection PIN
    IRS Representation
    IRS Rights
    Joint Tenancy
    Key Performance Indicators
    Kiddie Tax
    Layoffs
    Lease Accounting
    Leave
    Legacy
    Life Insurance Trusts
    Loans
    Long Term Care Insurance
    Managing Employees
    Market Capitulation
    Marriage Penalty
    Maternity And Paternity Leave
    Medicaid Trust
    Medical And Dental Deductions
    Medicare
    Mergers
    Mileage Rates
    Morale
    Mortgages
    Multistate Taxes
    Myers-Briggs Personality Types
    Net Investment Tax
    Net Pay
    New
    Newsletters
    New Tax Law
    Noncompete Agreements
    Operating Loss
    Opportunity Zones
    Organize Your Finances
    OSHA
    Outsourced Accounting
    Overtime Exemption
    Padding
    Pandemic Planning
    Papers For Taxes
    Part-time Help Tax Rules
    Passwords
    Payable On Death Accounts
    Paycheck Protection Program
    Payday Changes
    Payday Frequency
    Payroll Cards
    Payroll Scams
    Payroll Taxes
    Pensions
    Personal Finances
    Power Of Attorney
    PPP Loan
    Private Tax Debt Collection
    Profit Sharing
    Property Taxes
    Protecting Wealth
    QSEHRA Benefits
    Quarterly Tax Returns
    R & D Tax Credit
    Real Estate 1031 Exchange
    Real Estate Held In IRA
    Real Estate Investment Trusts
    Reciprocal Agreements
    Records
    Recovery Rebate Credit
    Referral Program
    Rehiring Staff
    Remote Employees
    Reporting
    Reputation
    Retirement
    Revenue Recognition
    Reverse Mortgage
    Sales Tax
    SBA Loans
    Schedule C
    S Corporations
    Self Employment Taxes
    Severance Pay
    Sexual Harassment
    Sharing Economy Tax Implications
    Sick Leave Rules
    Small Business Administration
    Social Media
    Social Security
    Spendthrift Trust
    State And Local Taxes
    Student Loans
    Success
    Succession Plan
    Supplemental Wages
    Supply Chain Risks
    Tariffs
    Tax Brackets
    Tax Breaks
    Tax Changes
    Tax Credits
    Tax Debt Collection
    Tax Deductions
    Tax Forms
    Tax Implications
    Tax-Loss Harvesting
    Taxpayer First Act
    Tax Planning
    Tax Preparation
    Tax Reform
    Tax Refunds
    Tax Scams
    Tax Tips
    Trump's Tax Law
    Unemployment Tax
    W-2 Form
    W-4 Form
    W-4 Requests
    Wage Garnishments
    Wages And Overtime
    Wildfire Solution
    Wills And Trusts
    Withholding
    Work Opportunity Tax Credit
    Year End Tax Considerations

    RSS Feed

Proudly powered by Weebly