Three percent raise...Raises are always mentioned and referred in percentage increases and around 3% tends to be the norm it seems for most corporate positions. Hourly breakdowns for 3% $12 hr salary = 36 cents (20k range) , $15 hr salary = 45 cents (30k range) $ 20 hr salary = 60 cents (40k range), $ 25 hr salary = 75 cents (50k range) $ 30 hr salary = 90 cents (60k range) So to get a dollar an hour increase you' d have to be making about 33$ an hour already, or about $68k In todays market is 3% really considered normal and good, and competitive, and reflective of a strong review? Is it really acceptable in today' s society and market for an experienced, educated, professional in a mid-salary range (say the fifties) to feel adequately compensated by a $75 cent pay raise? With rising health care costs and cost of living increases, is 3% for professionals cutting it? I draw the line at professionals, because I observe my non professional blue collar friends making $15 an hour, and realizing raises of 50 cents to 1 dollar per hour, while professionals in the 40, 50, 60k pay range working in offices are seeing the same types of increases.... This doesn' t make a lot of sense to me. At this rate, how do companies remain competitive in retention? How do professional employees giving 100% stay motivated and loyal? How do non-vested professional employees "get ahead" without moving into management, or onto another employer? At this rate, could blue collar jobs begin to outpay professional jobs? Is it worth it then to spend the money on college degrees ? Understandably, those vested in 401k' s or SDRP' s have that extra compensation to offset the minimal increases. Is the expectation then to wait it out for the five years at 3% a year and hope for strong markets for 401k and SDRP investments? Given the volatility of todays economic conditions, that seems like a gamble to me. Do you think employers are losing more workers over low salary increases? Is everyone happy and accepting of this 3% norm as a typical pay increase for excellent performance? For those incrementally creeping along at the speed of 3% a year - where is the progression path? Where is the reward for employee loyalty? By the same token, you have people starting in a company when they are 25, taking a 3% increase for the next 15 years, and then ending up with salaries that are way too high for their contribution...they have not updated thier skills, gotten additional education, just stayed...Is this the reward? After soo many years, the reward is being overpaid? Then it all equals out? Jim starts at age 25, and makes 27k a year and gets 3% raises the next 20 years... Year 1: 27k , Year 2: $27,810 , Year3: $28,644, Year4: $29,503, Year 6: $30,388, Year 7: $31,299, Year 8: $32, 238, Year 9: $33,205, Year 10:$34,201, Year 11: $35, 227, Year 12: $36,283, Year 13: $37,371, Year 14: $38, 492, Year 15:$39,646, Year 16: $40,653, Year 17: $ 41,872, Year 18: $43,128, Year 19: $44,421, Year 20: $45,753............ Does this job need a resource paid this high to fill it? Is this how America works? Does this promote innovation? Is this the best way to reward/pay and manage payrolls? Or is the hope that most employees will stick around for several years and then jet? Meanwhile, job hopping for more money is frowned upon... but what is the alternative ? Without even attempting to answer all the questions you posed, the alternative for many people is initiating a job search in an attempt to advance their careers in terms of responsibilities and compensation. Obviously, salary isn' t the only factor people consider in terms of their careers. While salary is important, so are things like opportunities for promotion, job satisfaction, comfort level, working conditions and surroundings, benefit packages, bonuses, commissions, and other opportunities for additional compensation. And for many people the extra effort required to earn another $5K or $10K per year isn' t worth it - believe it or not.
You're not taking inflation into the calculations. At year 20, a person would be making LESS than at year 1 in adjusted dollars since average inflation is over 3%.
So, what' s your recommendation to our original poster? Great post. I' ve often wondered the same thing myself. Allow me to give a good example of what you' re talking/asking about... A couple of years ago I worked for a company where it was just me and one other person in the department. She had been there roughly 7 years and I was new to the company. She frequently missed work so I was asked to cover her duties. I didn' t mind that and actually encouraged the extra responsibilities. However, In order to keep up with the volume of work I had to come in early and stay late, and I usually worked through my lunch. The only response I got on this was that the HR Department threatened to write me up for not taking my lunch. When it came time for my review, I had to wait an extra month to get it because my Supervisor was supposedly going back and forth with HR trying to get me more money. Unfortunately, this got my hopes up. It turns out I got an extra .69 cents an hour, going from $17.31 to $18.00. While this may have met the industry standard, it was certainly not commensurate with the work I did for them. The reasoning for the raise amount was, predictably enough, that the company was struggling and "the money was not there." And therein lies the problem... companies expect you to put in maximum effort (rightly so) but come review time they can always fall back on "hard times" as an excuse to not give you your due. Don' t get me wrong, I completely understand budget constraints. But in my opinion companies need to take care of good employees if they want to retain them. And let' s be honest, a good salary increase is one of the best ways to show their appreciation. And this is why I have issues with the concept of "job-hopping." While I know it doesn' t look good to have numerous jobs on your resume, I completely understand an employee going to another company who offers them more money when their current employer doesn' t acknowledge their hard work monetarily. Loyalty and dedication begets loyalty and dedication as far as I' m concerned. An employer shouldn' t ask anything of an employee they aren' t willing to offer themselves. Not surprisingly, my old company is struggling. They went from over 600 employees while I was there to now 250 (due to layoffs and many people leaving voluntarily). The company I currently work for started me at $19 an hour (not much of a change) but gave me a $2 raise on my first review based on my hard work. I suppose leaving my old company could have backfired but that was a chance I was willing to take. While job-hopping isn' t necessarily a good long-term career move, neither is staying with a company that has proven they aren' t serious about retaining good employees. I was recently told by a recruiter friend of mine that the average tenure of an employee these days is 18-24 months. Not sure if this is true, but I wonder if the average 3% raise plays a part in that? In 2000 I starting working for an IT Consultantcy firm, that I really really wanted to work for. Well, that year economy was down, so: no raise. No problem I said, just give me some extra training and I'll be happy. The next year, economy was still down, so: no raise again. No problem I said, just give me some extra training in this and that area and I'll be happy. I did get all the training I requested and I learned a lot, but meanwhile my financial situation didn't improve, ergo it got worse. Got married, got kids, you know the drill. Anyway, halfway through the third year I asked my manager, in a respectful one-on-one, what his expectations were for the upcoming "salary negotiations", and he told me that, even while I was a valued employee, I (and anyone else) was not expected to get a raise, again. I think I've shown my loyalty, but one month later I turned in my notice. Frustrated?, oh yes. Regret? Only over that fact that it took me almost three years to do so. More recently (2006), I was doing an extremely good job at another company. Words like "high performer" and "impact-player" decorated my yearly review... The offer? 3%. Very unsatisfactory, since I wanted at least 4% to keep up with inflation. So I talked to my Manager, HR and the VP and told all of them that I was very unhappy about their offer, but got the same answer everywhere: Corporate guidelines etc. etc, I'm sure you're all to familiar with them. So guess what, one month later I turned in my notice. The next day I got a call from HR asking me why I had decided to quit the company so that they could learn how to better retain their "talents". Well to make a long story short, I did the math for them: 4% - 3% = 1% (Still no response). Then I translated this 1% in to a dollar amount per year and then per month... Then it suddenly hit them. Of course, at that point, they were willing to make the counter offer, but I already had committed myself to another position, at an almost 25% raise (emphasis on "committed myself" and not on the "raise"), and had to decline. So, from a negotiation point of view, the first rule is to set your own personal upper and lower limits. Do not ask too much, for that might scare them off. When offered not enough, draw your conclusion and decide what to do from there. Please note that I'm not saying to quit your job right then and there, just review the process, your opportunities and make the assessment. As a side note: You might even incorporate the Percentage-to-Cash method in your negotiations. One last word (of warning, if you want): Even when negotiations turn out bad for you and you have decided to quit your job, please be a professional about it and work as hard as you did before, until that last day. After all: you accepted a job with a mutual agreed upon compensation. And just because the company doesn't want to pay more for your services, it doesn't mean you may offer them less for the same. Trust me when I say that this will improve your satisfaction rate more then anything else and will contribute greatly in your new job/position. PS: A little bit off-topic - personal notes. The real raises are achieved when either changing companies or positions within the company. I prefer the latter. Do not expect too much of a raise by holding on to the same chair too long. "Job hopping for monetary gains" is a phrase used by HR in salary negotiations. Your skills persuaded them to talk to you in the first place. "Loyalty" is something that has to grow and it's to be earned. Also it's not a one-way-street. Please keep this in mind, especially when you're working in a so called "Right-to-work" state. You leave out a few important things. First, many companies supplement their "raise" structure with a bonus program. I know in my company, the bonuses well exceed 3% per year. Second, 3% has been the average for the past few years, however as the job market tightens and employers need more incentive to retain employees you will see that percentage increase. So using 3% raise projections over the next 20 years is unrealistic. Finally, the way to make more money is to get ahead in jobs. Your projections assume that Jim stays at the same job for 20 years when, in reality, Jim should be advancing his career, changing jobs and responsibilities and getting increases based on those responsibilities. "Do you think employers are losing more workers over low salary increases? " Yes, definitely. Is everyone happy and accepting of this 3% norm as a typical pay increase for excellent performance? Definitely not. For those incrementally creeping along at the speed of 3% a year - where is the progression path? There is none, unless you change jobs. Where is the reward for employee loyalty? " Non-existent in many companies. Your post begs the question--what has happened to the merit increase? Years ago, a 2% to 3% raise was considered the very minimum, and that was a COL increase that one got just because the COL goes up every year. On top of that, you got a merit increase based on your individual and/or department performance. You could expect to see a 5% to 7% increase overall if you did your job extremely well and/or took on or were given extra responsibities, 10% or so if you got a promotion. And that is how it should still be. Companies today give you your 3% if you do a great job, and less if you don' t. So, even if you are busting your rear doing a bang-up job, you are barely keeping up with the COL. And, as companies require employees to take on more of the cost of health insurance premiums, you actually end up behind the game, not ahead! At my husband' s last job, you could not get more than a 3% raise, no matter how well you did your job. They called it a COL raise, but you only got that "much" if you exceeded expectations; less if you merely did your job well, etc. They said "We don' t give merit raises." No exceptions, period. Well, they lost a helluva employee because of that--he went to another company that still gives merit increases. So, where is the incentive for employees to continue to work hard and do outstanding work? It galls the hell out of me when companies complain they can' t find or keep good workers--blaming it on the worker. What do they expect when, no matter how well an employee does his/her job, they can expect a maximum of 3% raise? It' s insane. Who in his/her right mind is going to, day in and day out, kill themselves, work long hours, put in that extra effort, without any real reward? It is not enough to love your job--you still have to make a living, and if 3% raise puts you behind instead of ahead, it' s stupid to continue to work your a-s-* off. And contrary to another poster' s comments, not all companies give bonuses, or the bonuses are not generous enough to qualify as a "merit" increase. If the bonus one can earn is capped at, say, $500, that is certainly not a merit increase....
As others have mentioned, salary percentage increases alone do not makethe sum of employee retention. The employees as well as employers thatthink this way are severely limiting their careers. From the employee's point of view: Ifyou are at a mature company with great cash flow and crafty managementthen you'll probably be happy working there and have no interest inthis topic. Otherwise you will fall in the general case which I haveexperienced. The company is on a limited budget and sets this amountaside for raises. That amount is then distributed to the departmentsbased on their business cycle and objective. For example, No matter howhard you busted your azz, if upper management feel that they need to besales oriented and you are not in the sales department, don't expectmuch. That amount is further distributed among your peers; so the moreyou get, the less somebody else did. Forget percentages, if youhave a low base, it might look like a great percentage increase but thebottom line is you're still making chump change and vice versa forlarge bases. For the manager's point of view: It's notrocket science. If you are competent and you treat your employees well,being underpaid is a more forgivable circumstance than a professionalsin. If you know your department well and make direct correlations withrewards and performance, motivation works itself out. I was much morehappy and motivated when I got an unexpected 200 bonus for volunteeringto work 60 hours to cover two job positions than when I got a 2k bonusfor being forced to work 60 hours because management didn't properlyplan for the project. If an employee puts in the effort to jobhunt, go to interviews, and make changes in their lifestyle for the newjob, most cases are they left because of you. People leave theirbosses, not their jobs. I disagree with you PM. I have had to leave bosses I adored. I leave jobs, not managers. When possible I recruit old managers ot the new company as well as my friends. Companies don't realize sometimes the loss of one can result in the loss of many. I've recruited former workers to new companies many many many times. In line with what one of the other posters said, health care costs are rising and this year my health care cost increases nullified my big 3.2% raise. Bonuses, are taxed to death and are a one time shot, and no guarantee. My bonues was taxed at 38% - profit sharing rather. Really I woul dhave rather had an extra 13 cents and hour than the lump sum taxed to death distribution. Of course there is an expectation fo progression, but for those of us who have found what we like and love it and want to remain in it - perhaps we've been there done that (high end consulting, management, project management) and we've landed...it is discouraging to think we can't stay in it peacefuly for a while because the money is so poor we have to leave to do it elsewhere for more, or go in another direction or level than we prefer. Fortunately I have a nine mile commute, so I try to justify and hold off the recruiter calls based on commute time. The work day goes form being 9 hours o 11 hours because of a longer commute..divide that by salary, factor in gas...and er uh - no thanks. I guess everyone is in the same boat. Just remember HR, people talk. I know of at leats one person in another department who got a 7.5% increase. Many in my department got 3.8% and up - but it is all coming from the same pool - so the money is redistributed. What can you do? For one thing, I stopped working through my lunch and staying late and putting in extra hours. My max cap is 40 hrs a week. If i have to come in for a weekend emergency, I comp the time another day. I'm not a manager and know their paybands start at 20k more (bottom) than I make, so let them work the extra hours. I'm done doing it. I feel a lot better about it too. If the work doesn't get done...well I am so overqualified and so fast at my job there is no chance of that ever being an issue. ; )
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Career Tips
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