How to Determine Pay Raises for Your Employees

There’s no doubt that corporate culture has shifted. Gone are the days when a new college graduate would seek to cement their place in a massive Fortune 500 corporation and stay with that corporation till the end of their career.

Determining employee pay raise

There’s a far greater tendency towards job-hopping than ever before and if businesses aren’t intentional about retaining their employees then they’ll find themselves staring down the barrel of high recruiting costs to backfill leaving employees.

Pay raises are on the of most crucial ways that a business can keep its good talent in the long term.

You don’t want to break the bank to the point where the employee is unprofitable, but you also want to reward him or her for their work and show them that they are valued by the company. In this article, we’ll break down four key steps to figuring out pay raises this year.

Look at Metrics

The first step is always to look at your employee’s metrics. Any business decision that your company makes should be data-driven, and considering employee pay raises is certainly no different.

Ask yourself what metrics the employee in question is appraised by.

Where were their metrics last year? How have they performed in comparison to their peers? How much more are they positively impacting your company’s bottom line than they did last year?

Look at their paystubs (use software like to make yours) to see how their salary progressed in the previous years.

These metrics will play a large role in determining the percentage raise. If a salesperson brought in 50% more revenue this year than last year, then maybe it’s time to consider a significant hike in base salary to keep them around.

Consider Their Request

Your best employees will know what they’re worth, and they’ll ask to be paid accordingly.

You have to take their request for a raise into consideration whenever you’re deciding on the sum. If you don’t, there’s a good chance that they can find someone else who’ll pay them that amount.

Compare to the Industry Average

One of the best ways to determine pay raises is to look at the industry average.

How does the rest of the industry pay its employees, given years of experience? Chances are, you’ll be able to find this kind of data on websites like Glassdoor.

Think Beyond the Dollar Figure

Last but not least, think beyond the dollar figure. Raises don’t just have to be all about the dollar figure. You can also negotiate a lower pay raise by giving them more paid time off, a higher percentage of 401(k) matching, or a different job title.

Pay Raises Made Easy

There you have it — armed with this information, you should be all ready to start the process of deciding on pay raises for your employees this year.

For more business advice, be sure to check out the rest of the articles on the website!


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