It’s That Time of Year Again!  Tips on a Smooth Salary Increase Process

March 21, 2013, by HR à la carte | Performance Management

As the snow melts (hopefully!) and robins reappear, spring heralds that dreaded time of year for many organizations when HR folks and business owners are busy scrambling to finalize their salary increases.  Having been through this cycle more times than we care to remember, we have come up with a few tips and tricks to make the process smoother, less rushed, and error-free:

1. Establish a budget

The first step in a successful salary increase program is determining an appropriate budget for your overall payroll increase.  There are various sources of information to help you make this decision.  For example, the Conference Board of Canada has a yearly Compensation Outlook conference that surveys companies across Canada and provides a great report that includes both national and regional information.  Other organizations that may be of assistance are CFIB and your local Chamber of Commerce.  By using relevant data to make an informed decision on your overall payroll increase, you are also able to arm yourself and your line managers with that data if you receive questions from employees about their salary increase.

2. Provide clear guidelines and instructions for managers

Once you’ve established your budget, for example a  3% overall payroll increase, you’ll need to figure out a way of fairly dividing up that budget amongst your employee base and then ensure your managers understand the guidelines.  Providing an increase based on merit is one way of doing this (often called merit increases), especially if your organization already has a history of providing performance reviews to your employees.  We recommend assigning a particular percentage increase range with performance level.  For example, your poor performers, those who are not satisfactorily performing their jobs, you would not provide an increase to.  Your satisfactory performers could receive an increase in the range of 2% – 3% and your top performers you would reserve the biggest increases such as in the range of 4% – 5%.  As long as your overall averages out to 3% in the end you are in good shape.

3. Build a fool proof spreadsheet

Let’s face it.  You and your line managers are busy.  Why not make it easy on everyone and build a spreadsheet complete with formulae that follows the guidelines you already established?  It will save time and errors in the end.  Your line managers only have to input their increases and the spreadsheet calculates the average increase for their department, which will then roll up to your company’s overall increase.  It will also help you to have those tough conversations with the manager who wants to assign the same percentage to everyone, and thereby blowing the company budget on one department!

4. Build buffers in your deadlines (but don’t tell your managers!)

There will always be one or two stragglers in this process.  Make sure you plan for them appropriately.

5. Have a buddy system to check and re-check

That spreadsheet will be tough to look at once you’ve completed it.  Enlist some help to review the entire thing with a trusted colleague to ensure you’re not missing any potential errors or glitches.

6. Communicate before it hits the pay cheques!

One of the biggest faux pas of the merit increase process is for an employee to see their increase on their pay cheque before the manager has had a chance to sit down with them and communicate it appropriately, along with the rationale for the percentage increase.  Make sure this doesn’t happen by providing your line managers with a deadline to communicate, along with talking points on what to communicate.  You may even need to provide training to managers on how to handle this conversation as in some instances it may be a difficult one.

This time of year is full of angst for many of your employees and managers.  Help make it a less stressful time by ensuring you have a solid process in place along with a communication plan and where needed, training for your managers.

Good luck!