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How does your organization determine salary raises?

We're to a point now where we are too big not to have a formal raise policy in place (over 100 employees), as employees and managers start to complain about the lack of clarity and inability to point to a policy about raises. We do have an informal guidance of 3-6% annual raise depending on performance with higher raises for rock stars, but we need something more robust. So - would love to hear how you determine raises in your departments and companies and if you have a formal policy / structure to stick to?


(Financial Controller) |

since 2008 we no longer have any annual raise. management will provide a guidance prior to bi-annuals increase raging from 5 to 10% based on perfromance

(Chief Financial Officer) |

During our annual budget cycle, we plan for a certain pool of money to be available for annual raises (typically around 3% of eligible salaries). In conjunction with our employee appraisal cycle (employee self-reviews and manager assessments), each Manager is provided an excel spreadsheet that includes (1) salary history for his/her direct reports, and (2) the calculation of his/her available 3% pool. The Manager then needs to determine the allocation of that set pool of money among the team. "Rock stars" should qualify for a bigger bite of that pie! By providing a set dollar limit, it forces a relative "performance-based" allocation of funds.....such differentiation being important for maintaining a high-performance work culture. Of course, all of these individual team allocations are reviewed by the head of HR and the CEO to ensure equitable allocations across the company. And everyone manages to what was budgeted. I've used this program many times across different companies, and Managers always do a great job with this system.

(VP - FInancial Planning and Analysis) |

Annual review process. Pool of money allocated to each department based on percentage of total wage base. Department head reviews with supervisor proposed increases and so on up the chain of command. HR coordinates.

(Director-Finance) |

A certain pool of money is made available for annual raises. Each Manager reviews direct report performance with department head and makes suggestions for raises. In the end it is left up to the department head to determine the approved raise which often does not correlate to employee performance.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

You could offer a bonus structure with KPIs tied to specific measurable KPIs for each position. We have an annual review and can earn up to 3% per year; more of a cost of living adjustment. It's tied to an evaluation on behaviors/performance and that percentage increases the bonus % unless the bonus % is too top heavy, then it will go into salary. We then annually compare all positions to Payscale or to ensure we are paying at or above the median income by position.

Michelle Rogers
Title: CEO
Company: Virtually There CFO Services
(CEO, Virtually There CFO Services) |

We use the 'increase pool' approach where the manager (along with support from HR) divides up their increase pool among their staff, using the previous year's performance as guide. It is effective when the manager has set expectations throughout the year regarding performance. We are currently rolling out the use of job scorecards (ala Bradford T. Smart's Top Grading methodology) to remove ambiguity as to what 'good' looks like.

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