Four raises a year

Tessara Smith,  PayScale

One of the latest trends in employee compensation and motivation is giving employees four (small) raises a year as opposed to one large raise. Many companies have become strong proponents of this innovative payment strategy and executives are dumping the annual salary review in favor of giving out raises and bonuses a couple times per year. This begs the question, are quarterly raises a good idea for your company?

In theory this is a great strategy because it gives employees pay raises on a somewhat regular basis and therefore keeps them satisfied and working hard. From a retention standpoint, this seems like a great way to keep workers feeling like they are moving up in the company. 

You would think workers would rejoice in this schedule of consistent pay days increases but their response has actually been quite the contrary. The majority says that this type of pay schedule is actually an insult to the effort that they put in to their work.

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Unfortunately, while this approach may seem like an effective strategy to you, it does not have the practical implications that you would assume. If you take a step back and examine your employee’s paychecks, you will find that it is actually difficult to see that there have been any increases made at all. A one percent increase on a salary of $50,000 will ultimately result in only $15.00 more per bi-weekly paycheck (after various deductions). We all know that kind of money doesn’t really buy much in today’s world of ever inflating prices. Although your employees certainly aren’t going to reject any type of salary increase, they aren’t necessarily jumping for joy either. The reality is giving more frequent raises of smaller quantities are hardly motivational. This is especially true if you are giving out the same type of pay raise to every employee on your company’s payroll.

A logical leader knows that even though money is an important element when it comes to maintaining an engaged workforce, it is not the only determining factor of employee motivation. The reason an employee rolls into the office at 9am every morning, is not only to make a living, but also because they are content with the overall atmosphere of their employment. Even in careers that pay a fair market-based salary, most will not stick with jobs where working conditions are poor or management is disorganized. 

The point being; it’s really important to get salary right as a first step toward retention, but money does not necessarily equate to the level of job satisfaction. The majority of workers would much rather have a good boss or manager and a better work environment as opposed to sporadic salary increases throughout the year. Furthermore, unless you can afford to give your employee’s four substantial raises a year, your small efforts at rewarding them monetarily will likely come across as a halfhearted head pat. A better idea would be to give your employees larger annual pay raises however this could set a precedent that could lead to overspending. I am not saying that it isn’t good practice to continue to implement new employee reward strategies, but in this case it is probably best to stick with tried and true methods.

Want to make create a pay plan that actually motivates employees? This whitepaper, Strengthen the Link Between Pay and Performance, can help.

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Dr. Valdemar Hill, Jr.
Dr. Valdemar Hill, Jr.

Tessara Smith, you are right on point! We have known for years that money is a maintenance factor rather than a motivator. Notwithstanding the fact that employees would love to get pay increases, that, in and of itself, does not guarantee improved performance and appropriate/acceptable behavior. They, as you pointed out in your article, would much prefer a work environment wherein they experience a quality relationship with their supervisors!