Great Job Kid! Here's Your 5%, Now Be Happy...

Is a 5% bump for your top performers enough?  That's the 64K question...

My source for all things compensation related, Ann Bares of Compensation Force, has broken down the merit pay side of the most recent Mercer Comp Survey.  According to Mercer's survey, the highest performing employees are expected to receive base pay increases of 5.7% in 2007, compared to 3.5% for average performers and 1.7% for the weakest performers.  Over 1,000 large companies participate, so it feels valid and the numbers seem about right:

Average pay increase percent by rating group according to Mercer via Ann:

• Highest-rated employees (12% of workforce):  5.7%
• Next highest-rated employees (28% of workforce):  4.5%
• Middle-rated employees (52% of workforce):  3.5%
• Low-rated employees (6% of workforce):  2.0%
• Lowest-rated employees (3% of workforce):  1.7%

The big question in my mind remains the same.  Would you downsize a low performer and not get the headcount back to thrill your high performers with a bigger increase? 

Comments

[Ann Bares]

Kris:

Great post and good questions. And at the heart of it is a tough one: who do you penalize in order to reward your top performers? Our knee-jerk response: the low performers, of course. The problem with this is - for most organizations and as the Mercer statistics above demonstrate - there are many more high performers than low performers. (And that, of course, is a whole different issue.) So, unless you are willing (as you suggest) to let go of the low performers and put the savings into rewarding your stars, its tough to come up with much in the way of additional merit dollars to spread around. Or, you can start nicking the raises of the middle-rated people, which is something many of my clients really struggle with.

No wonder the masses are turning increasingly to variable pay to reward their top performers!