4 Important Guidelines for Giving Pay Increases

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4 Important Guidelines for Giving Pay Increases

Pay increases are an important part of a compensation system as they aim to reward employees based on their performance achievements, but your organization should make sure you follow these four important guidelines when administering pay increases.

1. Base pay increases on your performance management and goal setting processes.

Pay increase practices should be aligned with not only your organizational culture and best practices for your organizational size and industry, but they also should align with your organization's performance management and goal setting processes to make sure that variations in employee performance are measured accurately and fairly rewarded.
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Demand for Technical Skill Sets Help Deliver Strong IT Salaries

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Information Technology (IT) continues to be an area of exceptional growth in the job market, both nationally and locally. Using data from the 2013 ERC Salary Survey, the average median salary growth of various occupational categories within IT, as set by the Bureau of Labor Statistics, can be seen below. The positive salary growth this figure illustrates is unsurprising when two key factors are considered.

Job Growth

Nationally, the field of “computers and mathematics” is predicted to see job growth as high as 22% between 2010 and 2020. Locally, the MSA (metropolitan statistical area) encompassing Northeast Ohio falls just short of those job numbers, projecting 16.1% job growth during the same time period. When compared to the overall job growth projections encompassing all occupations, nationally (14.3%) and locally (1.7%), it becomes clear that IT is seeing much more positive job growth than other industries in Northeast Ohio.
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Pay Trends Emerge in Northeast Ohio

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The 2013 ERC Salary & Wage Surveys report salary data for 9,000+ individual employees from 200+ participating organizations and hourly wage data for 7,500+ individuals from 150+ organizations respectively. This unique local market data is a key resource for employers in the local business community looking to attract and retain top talent in to their organizations in Northeast Ohio.

While pay rates from these annual surveys remained fairly stable overall, certain industries did see more positive patterns of growth than others. Industry specific growth was strong in IT, Science/Research & Development, Customer Service/Sales, Purchasing/Distribution, and Business & Administrative Support. Each of these areas saw their average median salary grow by 4% or more overall from 2012 to 2013.
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Compensation Rising for Recent Graduates

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With graduation day only a few months away, the pressure is on for many soon to be college graduates in need of full time employment. This flood of new job seekers on the market come May offers employers a great opportunity to take on these highly educated, enthusiastic potential new employees- and, even better, in most cases, these new employees can be brought on board at entry level compensation levels.

Benefits of Recent Grads

In fact, ERC/NOCHE’s 2012 Intern & Recent Graduate Survey reports that 42% of employers make their entry level hires directly from this pool of new college graduates. Their reasons for doing so are fairly consistent from year to year with the vast majority of employers recognizing new graduates not only as a great value (strong educational background, again for entry level compensation levels), but also as an opportunity for their organization to develop a talent pipeline, infuse the workforce with new energy, and boost the level of tech savvy among their employees.
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Skilled Manufacturing Salaries Gain Ground

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Despite multiple reports of optimism about Northeast Ohio’s manufacturing sector growth rate, the widely publicized quarterly economic indicator report published by Team NEO for the fourth quarter of 2012, further analysis offered by the report’s research team concedes that growth does not translate directly into job growth. The quarterly report cites data from Moody’s, placing the region above the national average for manufacturing sector growth rates. But, the researchers point out that increased production does not guarantee job creation at those same levels.

At least in the short term, manufacturing job growth here in Northeast Ohio does seem to be accompanied by slightly more competitive salaries when compared to national averages (2013 EAA National Wage & Salary Survey). Although the increases are small, only a few percentage points each year, skilled manufacturing positions such as welders and CNC machine center operators are among those that are consistently gaining ground and ultimately becoming more competitive when compared to national averages.
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3 Pay Problems Most Companies Face And How to Solve Them

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Pricing new and highly specialized jobs, salary discrepancies between sources, and making pay adjustments based on mixed rates of salary growth are three common compensation problems many companies are facing. Here's how to resolve them.

Pricing new and highly specialized jobs

New and "hybrid jobs" are increasingly being added to workforces and often include unique and highly specialized IT, marketing, and technical positions (i.e. Social Media Manager). Employers find that current compensation information sources may be limited because do not have specific pay data that directly match the job and are challenged in setting a competitive salary.
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Occupational Outlook: A Snapshot of 2013

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A recent article from Forbes.com, cited Software Developers, Accountants & Auditors, and Market Research Analysts as the three job categories with the “best” outlook for 2013. According to the report, these jobs have seen job growth rates since 2010 of 7%, 3%, and 10% respectively. In terms of the total number of positions that’s just under 140,000 individual jobs created among those top three categories, with half falling exclusively under the Software Developer category (including both systems and applications developers).

According to the Bureau of Labor Statistics’ 2012-13 Occupational Outlook Handbook, not only have these jobs seen relatively strong job growth post-recession, but they are also being projected to continue growing at or above the market average- with Market Research Analysts coming in at an impressive 41% growth through 2020.
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Non-Profit Salary and Benefits Data Published

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In collaboration with United Way of Greater Cleveland, ERC is pleased to announce the publication of the 2012 Non-Profit and Health & Human Services Compensation and Benefits survey results. By drawing upon both United Way’s strength as a preeminent organization in the non-profit community as well as ERC’s reputation as Northeast Ohio’s leading publisher of local workplace information and salary data, these surveys provide current and reliable compensation and benefits benchmarks to non-profits across the region.
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3 Reasons You're Losing Employees Because of Pay

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In this article, we explore three current and critical compensation problems that cause employers to lose talented employees. These issues include low salary increases, lack of differentiation in pay by performance, and difficulties finding the actual "going rate" for jobs.

Problem 1: Low or modest salary increases

Salary budgets have been lagging for 3-4 years, pay increase budgets are not growing rapidly, and the outlook for significant pay raises is fairly bleak. This means that your employees' salaries probably aren't growing. What happens when the market doesn't match what your employees want? Should you keep your pay practices firmly aligned with the market, or adjust them to what your employees want?
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Where Do Pay Adjustments Come From?

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As reported in Crain’s Cleveland Business in September of 2012, Northeast Ohio employers both gave and are projecting giving an average of a 3% increase across all job categories in 2012 and 2013, respectively. But how are these increases determined and what do they mean in terms of an overall investment by the organizations offering raises?

While the ERC Salary & Wage Adjustment Survey itself does not report on these specifics, it does specify that that this 3% increase accounts for any pay adjustment given during a 12 month period and could include any adjustments from general across-the-board or cost-of-living adjustments to merit based raises. Some additional insights can be drawn from another ERC survey published in early summer of 2012, i.e., the 2012 Pay Adjustment & Incentives Practices Survey. According to this survey, merit based increases are by far the most common method of determining increases here in Northeast Ohio, approximately 80% of respondents. Of those organizations providing merit based increases, a wide majority do so on an annual basis regardless of organizational size or industry type. Interestingly, cost-of-living raises were the least popular type of adjustment, coming in at just under 7%.

Based on ERC’s historical data trends for the Pay Adjustment & Incentive Practices survey, this strong preference for merit based pay adjustments is far from surprising. However, a steady decrease in cost-of-living pay adjustments over the past several years accompanied by a corresponding increase in the frequency of merit-based raises offers a clear illustration of the continued move towards pay-for-performance.

View ERC's Wage & Salary Adjustment Survey Results

The survey reports data from Northeast Ohio organizations regarding their actual and projected wage and salary adjustments.

View the Results