9 Best Methods for Determining Pay Raises for Employees

Pay Raises for Employees

Each company gauges the contribution of its employees differently. Some focus on deliverables, while others rely on employee loyalty and worked hours to determine a worker’s contribution to the business.

All of these assessment methods have the same goal in mind: to determine whether an employee deserves a raise or not. But how can a business determine which of these systems is best and most suitable for its own workforce?

How to Determine Pay Raises for Employees

To shed some light on the issue, we asked nine entrepreneurs from Young Entrepreneur Council (YEC) the following:

“What’s your best method and/or process for determining pay raises for employees, and why do you prefer this strategy?”

Here’s what YEC community members had to say:

1. Factor in Industry Standards

“I always begin by looking at comparable roles and salary ranges among our industry. We want to be consistent with, and even a bit above, what those companies are doing. Factors include longevity at the company, overall job performance and the value they bring to the company both directly and indirectly. Attitude and how they vibe with fellow employees are also major factors in determining raises. ” ~ Justin Lefkovitch, Mirrored Media

2. Consider the Value They Bring

“The biggest asset we look for is the amount of value they provide for the company. This is more than just being busy or helping the business profit more. It’s about building the long-term relationships with clients that help the company thrive and grow. We look at several other things, such as length of time in the company, commitment to doing their best, ambition to grow and much more.” ~ John Hall, Calendar

3. Look at Consistency

“Over time, employees change. They tend to be excited at first, but in time they become bored and lack consistency. For me, a raise should be based on the person’s performance and how consistent they are over time. Also looking at their attendance, performance, sales, attitude and even growth, you will know whether an employee deserves a raise based on how passionate and hardworking they are over the years.” ~ Daisy Jing, Banish

4. Analyze Their Quarterly Reviews

“We determine pay raises for our employees by compiling their quarterly reviews from the year and looking at their performance. Our reviews are done on a point basis. The number of points an employee receives at the end of the year determines their raise. I like this strategy because it means that employees are getting raises that align with their performance within the company.” ~ John Brackett, Smash Balloon LLC

5. Create Specific Assessment Metrics

“The best method for determining pay raises is to create a metric for what matters to your company. For example, for our fulfillment employees, what matters are the following: 1) accuracy, 2) output and 3) attendance. So, I create a specific metric for each of these categories and evaluate quarterly. Creating a metric is key because feelings are not involved, and there is no unfair treatment.” ~ Shu Saito, SpiroPure

6. Consider Their Overall Performance

“We look at the employee’s holistic performance, as well as loyalty and tenure, to determine pay raises. The longer an employee stays with us, we know they value the organization and team. So we do take into consideration how long they’ve been a part of our team when it comes to determining pay increases and other benefits.” ~ Kristin Kimberly Marquet, Marquet Media, LLC

7. Look at Seniority and Work Quality

“Pay raises are important for everyone on your team. We use a system that looks at the seniority of the employee and the quality of their work. I like this strategy because it’s easy to calculate, and it’s fair to the employees. Dedication and hard work should be rewarded, and our strategy allows us to reward our team for both.” ~ Chris Christoff, MonsterInsights

8. Run Periodic Wage Assessments

“Periodic wage assessments and increases can be a powerful extrinsic motivator for individual employee morale. You want to plan it out so that no more than a year will pass before an evaluation for a wage increase happens. The more often, the better. You should leave yourself room to compensate for exceptional performance within a year.” ~ Reuben Yonatan, SaasList

9. Measure Objectively and Subjectively

“Create performance reviews that have both objective and subjective sections. The objective part is for measurable metrics, and the subjective section is for things like teamwork and collaboration. An overall score can then be determined, and a pay raise is based on that number. This is preferred because it gives some organization and structure to the process.” ~ Andrew Schrage, Money Crashers Personal Finance

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Image: Depositphotos.com

This article, "9 Best Methods for Determining Pay Raises for Employees" was first published on Small Business Trends



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