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Use Data When Setting Raises, But Don't Stop There

How the PayScale Index Fits Into Raise Planning

Some high level strategic thinking and data gathering must happen before raises can be given out. From following inflation and local market rate shifts, to considering business goals and budget constraints, HR professionals must be extra hard working and efficient with their time to pull off smart merit increases. How can all of the information gathering be simplified? When do you have enough input to make a smart decision?

Katie Bardaro, lead analyst at PayScale.com, works with compensation data all day every day and she reminds us that basic information about market rates for labor and inflation is critical, but it is not enough. "You need to understand employees' performance and the knowledge they've gained," she says. 

Bardaro suggests that those deciding raises check out The PayScale Index to ease their information collection burden. The PayScale Index is a quarterly report that follows trends in pay for full-time private industry workers in major industries, metros, job categories and company sizes. It takes into account both inflation and the wage growth for particular job roles and markets. For example, if you are in Seattle, the Index would tell you that wages have climbed significantly, while companies in Riverside, CA have seen wages decline over the past few quarters.

If you already use The PayScale Index to plan your raises, good for you! You've saved time by pulling all the non-individual specific data together in one place, but don't stop there. According to Bardaro, that information works best when blended with input about the individual – where they are in their career and how well they performed in the past year. 

Take an HR manager in food services and accommodation as an example. The PayScale Index shows that wages in that industry have declined over the past few quarters. The manager can start out knowing that most workers’ wages likely won’t rise much, if at all. But, they should also consider the performance of a stand-out employee they want around when their industry bounces back. If companies fail to reward star performers, they run the risk of losing them to better offers elsewhere, Bardaro argues. 

The employee’s years of experience also matter. Bardaro asks you to think of a maturity curve, comparing wage growth to years experience or age. Some positions require years of development to achieve competency. In industries like legal services, each year brings more professional knowledge and certifications. This increased value is a vital portion of the raise calculation, whereas a receptionist may not see the same pay growth over a lifetime because they can achieve full competency early on.

In time, even the lawyers' maturity curve will flatten but they will likely be getting bigger raises, for a longer period of time, than the receptionist. "At a certain point, there is nothing new to learn in a job" says Bardaro. 

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