A reader writes…
Is it normal for companies to conduct employee performance reviews and offer annual pay increases? If so, how are things looking for 2012?
Dear, “Financial Forecast,”
I remember, back in the day, when employee performance reviews and pay increases were a routine “event” each year. Managers would set a date to either meet in the conference room (or even go out to lunch) and go through a thorough evaluation of the work ethic, productivity, attitude, responsiveness – you name it, the review covered it – of each individual employee within his or her department. At the end of each review, the moment of truth would arrive… the pay increase! Back then, a top performer could expect an annual increase of 7% -10% (if not more). Anyone receiving a 5% increase or less was walking the fine line of termination.
Times certainly changed! By around 2001, annual percentages decreased significantly, and a 5% pay increase was considered “top notch!”
With the economic downfall over the past several years, companies have either done away with annual increases altogether, or they have turned to a pay-for-performance approach in which increases and incentives are focused on high-performing employees only.
Now, it doesn’t take a financial expert to realize that today’s economic recovery has not picked up enough to significantly raise salary budgets to the levels they were back in the heyday.
However, according to information I found on the Society for Human Resource Management (SHRM) site, base salaries in 2012 are expected to increase on average:
- 0.7% for “low performers”
- 2.7% for “middle performers”
- 4.0% for high performers
According to a compensation practice leader at WorldatWork, “The situation where significant numbers of employees are not receiving any pay increases appears to be over for now.”
In my opinion, an annual increase (at least to keep up with the cost of living) should be implemented across the board. It may be wishful thinking, but since the price of everything else seems to go up without a problem… why shouldn’t this?
What do YOU think?
Post your comments here!