Benefits and Compensation

Is 3% Merit the ‘New Normal’?

Salary Increase Budget Surveys

Most employers are working with 3 percent for merit, as shown by this chart taken from a recent WorldatWork survey, says Pasteris. (Pasteris, president of TLMP Consulting Group, offered her suggestions during a recent webinar sponsored by HRHero/BLR.)

Actual 2010

Mean

Median

 

2.5%

2.7%

 

 

 

Actual 2011

Mean

Median

 

2.8%

3.0%

 

 

 

Actual 2012

Mean

Median

 

2.8%

3.0%

 

 

 

Projected 2013

Mean

Median

 

3.0%

3.0%

 

 

 

How Do You Stretch Your Budget?

First of all, says Pasteris, look at how your budget is structured. There may be more money available than you think. For example:

  • How are promotions or other equity increases handled? Are they over and above the budget? If the promoted person is lower in the range (likely), there may be some savings.
  • Can turnover help? Retirements, resignations, and terminations generally mean a job is open for some period of time and, thus, not draining the merit budget. And, again, replacements may be lower in the range than those they replace.
  • Can appraisals help? Not everyone will get an increase, and that means more available for the others who do get one.
  • How about leaves and terminations? Unpaid leaves of absence and periods during which jobs are open may also mean more available in your merit pool.

Bottom line, you actually might have more money available than you thought. Even so, with a small budget, rewarding merit is not the easiest thing to do. The basic rule is, everyone can’t get that average increase—some have to get less so some can get more.


Get ADA compliant job descriptions for your jobs with a Free Market Analysis Report. Also receive guidance on how to use our Compensation Analyzer tool to do market analysis, identify internal and external inequities, and track compensation.


Keeping Your Best Employees

Here are suggestions from Pasteris on retention:

  • Conduct a competitive market analysis. You have to know where you stand.
  • Introduce or review your compensation management tools.
  • Check salary grades and ranges. Make sure salary range midpoints compete.
  • Establish ranges that are wide enough to give you some flexibility.
  • Pay employees at the appropriate position in their range.
  • Give salary increases to certain employees only:
    • Top performers;
    • Employees in critical jobs (your core, critical competencies); and
    • Employees whose compensation is below market.
  • Carve out a separate budget for highest‐performing employees.

Top‐performing pay‐for‐performance companies give their best performers merit increases that are 3 percent or more higher than average employees, Pasteris says. Differentiation is difficult but possible, she adds.

Making the most out of a slim merit budget—comp manager’s daily bread—but just one of the daily challenges. “Maintain internal equity and external competitiveness and control turnover, but still meet management’s demands for lowered costs.” Heard that one before?  

Many of the professionals we serve find helpful answers to all their compensation questions at Compensation.BLR.com, BLR’s comprehensive compensation website.

And there’s great news: The site has just been revamped in two important ways. First, compliance focus information has been updated to include the latest on COBRA, Lilly Ledbetter, and the FMLA. Second, user features are enhanced to make the site even quicker to respond to your particular needs:

  • Topics Navigator—Lets you drill down by topical areas to get to the right data fast.
  • Customizable Homepage—Can be configured to display whatever content you want to see most often.
  • Menu Navigation—Displays all of the main content areas and tools that you need in a simple, easy format.
  • Quick Links—Enables you to quickly navigate to all the new and updated content areas.

The services provided by this unique tool include:

  • Localized Salary Finder. Based on reliable research among thousands of employers, here are pay scales (including 25th, 50th, 75th, and 90th percentiles) for hundreds of commonly held jobs, from line worker to president of the company. The data are customized for your state and metro area, your industry, and your company size, so you can base your salaries on what’s offered in your specific market, not nationally.

Get an ADA compliant job description, grade assignment, rate range for that job, and salary data, all customized for your industry and geography. Better news? It’s FREE. Download Your Free Market Analysis Report.


  • State and Federal Wage-Hour and Other Legal Advice. Plain-English explanations of wage-hour and other compensation and benefits-related law at both federal and state levels. “State” means the laws of your state because the site is customized to your use. (Other states can be added at a modest extra charge.)
  • Job Descriptions. The website provides them by the hundreds, already written, legally reviewed, and compliant with the Americans with Disabilities Act (ADA) mandate that essential job functions be separated from those less critical. All descriptions carry employment grade levels to current norms—another huge time-saver.
  • Merit Increase, Salary, and Benefits Surveys. The service includes the results of three surveys a year. Results for exempt and nonexempt employees are reported separately.
  • Daily Updates. Comp and benefits news updated daily (as is the whole site).
  • "Ask the Experts" Service. E-mail a question to our editors and get a personalized response within 3 business days.

If we sound as if we’re excited about the program, it’s because we are. For about $3 a working day, the help it offers to those with compensation responsibilities is enormous.

This one’s definitely worth a look, which you can get by clicking the links below.

Click here to get more information or start a no-cost trial and get a complimentary special report!

3 thoughts on “Is 3% Merit the ‘New Normal’?”

  1. Valuable tips. But when a company budgets so little to merit raises, you have to wonder how much it even believes in the concept.

  2. Review by Gabriel for Rating: Kite assembly was very easy.Flying the kite was very easy with no exceeirnpe even by 5 years old (with some help)Kite fits into a small carrying pack.Only reason I’m not giving 5 stars is that packing it back is very hard and it is only a matter of time before it breaks.

Leave a Reply

Your email address will not be published. Required fields are marked *