HR Minute: Handling Pay Increases

By Claudia St. John

Pay-Day_graphicAt some point, all companies have to consider when and how to increase employees’ wages for reasons such as employment factors or legal regulations. Regardless of the reason, all companies should have a consistent policy and practice regarding giving or denying raises to reduce the chance of discrimination or disparate impact complaint.

Given the wide variety of job types, there are several reasons for raises as well as potential impacts to consider when establishing your company’s practice, but all such policies and procedures should include certain parameters, such as:

  • No increase is guaranteed even if one was received in the past.
  • Increases, if given, may be based on various factors such as employee performance, company profitability, customer satisfaction, and economic factors.
  • Increases, as with all aspects of employment, will not be decided based on any protected group, trait, category, or class.

Some things to consider for all pay increases include:

  • Pay of current or past employees with similar positions or job duties/responsibilities
  • Factors of similarity or differentiation such as seniority, experience, and education
  • Consistency between similar employees in different protected groups/classes/traits
  • Impacts on future decisions
  • Effects on company and/or department budget

Annual increases: timing coincides with an employee’s annual performance evaluation or work anniversary, or the company’s calendar. Considerations include: pay range for position, contractual obligations, andvalid reasons for differentiation.

Employee’s request: given in response to employee-driven reason such as to match competitor’s job offer, due to employee’s economic situation, or for recognition of completed work. Considerations include: value of employee’s job duties/responsibilities and other forms of compensation.

Due to internal changes: provided in conjunction with an employee’s promotion/change of duties or due to circumstances such as a revised client contract. Considerations include: value of employee’s new duties and position pay range.

Due to external changes: in response to mandated changes such as minimum wage or FLSA exempt salary increases, or new union collective bargaining agreement. Considerations include: wage compression and legal ramifications.

None of the above: offered for no established reason or schedule. Considerations include: inconsistent wages between similar employees, lack of budgetary control, low employee morale, and disparate impact.

Regardless of your industry or size, pay increases require planning and consistency.

Claudia St. John is President of Affinity HR Group, Inc., a national human resources consulting firm serving hundreds of clients nationwide. With more than 20 years of experience in human resources, employee engagement, and organizational development, she is an author and a frequent public speaker who contributes regularly to publications on the topic of human resources.

Image courtesy of My NC Retirement