It’s Time for a Raise—What Type Do You Want?
As we get closer to the holiday season, more employees are looking for raises. It’s always good news when you receive an increase in your pay, but the range of possibilities for increases is vast.
Some companies offer an annual raise that is usually a cost of living increase. This boost in pay is applied across the board to bump up all employees’ salaries, allowing paychecks to keep pace with inflation.
Other companies offer bonuses or merit-based raises that are applied using a metric to evaluate and reward each employee’s professional contribution. Offering merit-bases raises or other variable pay such as bonuses tends to be favored over applying an annual one-size-fits-all COLA.
Cost of Living Increase
Government jobs, as well as some non-profit sector position, adhere to the cost of living salary increase model. While a pay raise is always welcome, it can be a bit of a blow to morale when everyone earns the same pay raise, regardless of each person’s job performance. In some cases, a merit raise can be applied on top of the COLA. This way, the raise functions both as a means to ensure that all employees get a needed boost to keep up with cost of living , while extraordinary employees earn their proper recognition for their performance.
Variable pay includes merit-based raises and bonuses. These are usually calculated by applying a formula to access employees’ performance and then divvying up the available funds according to which employees earned the highest marks.
Rather than applying their resources to an annual cost of living increase that is uniformly administered, employers are increasingly likely to favor merit-based increases and other incentives that recognize excellence and make employees happier in their day-to-day work lives.
No matter what type of pay increase, most employees are happy for the extra money. Understanding the types of raises and increase can help you better understand the impact to your pocket.