Annual Reviews and Raises?

A reader writes…

Dear, Anita,
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!


12 Comments (+add yours?)

  1. James
    Dec 29, 2011 @ 23:25:04

    Well in regards to raises…what I want to know : What is the point of minimum wage? I suppose it gaurantees that you won’t get completely robbed;…but really, what’s the point? Why don’t employers pay a decent wage to be able to survive? I mean, if everyone, say after a probationary period, got a decent wage then there would be no need for all of these supplemental programs (i.e. food stamps; low-income housing; medical assistance….). Doesn’t it seem logical that if some of these fat cats that aren’t really paying any taxes anyway would disperse the wealth through wages, there wouldn’t be a need for “welfare”. But, maybe I’m naive.


    • m.capriola
      Jan 03, 2012 @ 11:56:54

      Attitudes haven’t changed much since the pre-New Deal days. The way things worked then is that employers pay as little as possible and let the employees worry about how to pay for food, clothing, shelter, medicine, etc. The general retirement plan for people who didn’t save enough money was to eventually starve or freeze to death. It’s been said that the New Deal came about because FDR, when governor of New York, became fed up with reading in the newspapers about elderly people found frozen to death in their homes.

      Nowadays, we have all these assistance programs to take up the slack, but the ultra-conservatives want a return to the good old days when poor people would go off into a corner somewhere and quietly starve to death when their usefulness was ended.

      Most employers, though, are quite happy to let the taxpayer foot the bill. Many corporations pay little or no taxes, and therefore have no incentive to pay high wages.

      I suppose this is a very cynical view, but it often appears that many people take the position of “I have mine, so screw the rest of you.”


  2. Rosemarie R.
    Dec 28, 2011 @ 20:20:29

    I was layed off July of this year by a company I worked for for 20 years. I had not rec’d a pay raise for 6 years even though my work performance was exceptional. They kept giving me excuses year after year. My mistake was not finding another job before they layed me off that way I would have had a better paying job and shown them I would not put up with their stingyness…the bosses were living the high life and the rest of us were not even getting cost of living raises. They lost their HR person 6 years ago who always helped each of us get our raises because he knew we deserved them. Word to the wise, never work for a company who does not have an HR person because noone will go to bat for you….but this company was unappreciative so this company I worked for was an exception to the rule. I’ve worked for many previous employers who were always appreciative. I wish I could tell you the name but I can’t burn that bridge, I need them as reference. Good luck to all in 2012. I pray the economy turns around for the better and I will find a better job. Anyone need a wonderful woman who will be an asset? I’m ready to get back to work…Bless you all


  3. Valeria Myrick
    Dec 28, 2011 @ 18:39:36

    Was employee with a company for three years. Company change mangement and didn’t take me throught the same hiring process as all the other previous employee’s. So how can stay a job, it the employee is not willing to give you another chance. By the way I was injured on the job.


  4. christian chamberlain
    Dec 28, 2011 @ 01:08:55

    Do you know anybody that needs a worker?


  5. Bree
    Dec 27, 2011 @ 12:44:18

    I have been at my current legal Secretary job for almost 2 years and in that time I have not received a pay increase at all. I work for 2 attorneys in a small office. This economy is really making things difficult for small businesses.


  6. Valeria Myrick
    Dec 27, 2011 @ 11:42:01

    When you apply online. Do your resume, be review for employment or is rejected. Because I wrote a inspiritional book Title
    A Foundation for a Well-order you. It cover drama from every part life.


  7. LIz
    Dec 27, 2011 @ 11:40:26

    we the people do need cost of living increase every year, I worked in a grocery store and watch food prices go up all the time.


  8. Manage Better Now
    Dec 27, 2011 @ 08:31:25

    I hope managers are conducitng performance reviews regardless of whether they are able to provide increases. If you don’t get a review or an increase then it may be time to start thinking about new employment. There have been times where my company could not give increases because the funds simply were not there. We still did conducted performance reviews and we made sure everyone understood why there were no increases. It is not what folks want to hear, but I would rather provide an informed explanation. You cannot ignore the issue and hope it goes away. Love the blog.


    • Shoe Closzet
      Dec 28, 2011 @ 10:40:34

      I agree with Manage Better Now. Although it’s not that exciting as an employee to hear “you’re great but we don’t can’t give you an increase at this time”. The flip side of that is most employees know the economy is not in the best state and the fact that they have a job (as compared to the millions that were laid off) may be all they need at this point. An increase is lovely but knowing you are doing a great job may have to suffice for now. As far as the manager side of things, I think it’s important to still perform performance reviews with or without the cost of living increase. I love the discussions on this blog.


  9. Artina Graves
    Dec 27, 2011 @ 08:19:00

    I agree its unfortunate but the average pay increase is not taking in consideration because we are still “trying to repair the economy”. They need to revert back to the status quo because it might take forever before we are back to where we were before.


  10. Kim
    Dec 27, 2011 @ 08:14:44

    Grow up “Financial Forecast”. Sounds like you’ve been working long enough to know the reality. Be happy that you have a job so you can feed all those screaming brats that you brought into the world during your “breaks” at your job. 10% raise? What–do you need another SUV? A bigger house? A vacation house? Be happy that you are employed–show up, keep your mouth shut and don’t use company email to send personal messages. Do that, and you might just get to keep your job.


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Anita Clew's blog posts are intended for general guidance and should never be taken as legal advice. In all instances where harassment, inequity, or unfair treatment is believed to be present, please consult your HR Department or legal representation.
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