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Got A Raise Budget Burning A Hole In Your Pocket?

Raises are Back

Spend It Wisely

Raises are back and in a big way. After years of stagnant salary growth, The PayScale Index shows that wages are growing across the economy. If you haven't already started discussing whether or not to offer raises yourself, we're going to make it easy for you.  

Here are three potential approaches you can take to raises in 2012-13. As you might guess, we think one is definitely better than the others.

Do Nothing

For those of a more cautious bent, it might appeal to hold off and wait to make sure that the economy really has rebounded, before offering raises of any kind. While that approach might save a bit of money in the short term, the long term retention costs could be more severe. Wages are up across industries, metros and job types. So no matter where your business is located or what it does, your competitors are probably offering raises. Your employees probably know it too.

Everybody Gets a Raise

Who gets paid? If your answer is everyone, you need to rethink. Across the board raises are expensive and provide the wrong incentive to top performers. You may not lose as many employees as you would with a no-raise policy, but the ones you do lose will be the ones you can least afford to see go.

Reward Performance

We've saved the best for last. Merit raises, properly utilized, turn a HR budget line item into a powerful profit-driving program. By tying merit raises to business goals, you make sure your employees are putting their everyday efforts into fulfilling the vision of leadership. Paying your employees for their performance, rather than their longevity or their loyalty, gives them the incentive to build corporate competitiveness and profitability.

Realizing the benefits of merit raises requires creating the right plan, integrating goals into the performance review process, and communicating your plans to your employees.

Did you know that you can easily automate the process of determining merit raises? To ensure that you get your merit rate increases right use PayScale Insight’s Raise Recommender.

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