I spent many years in big companies, and it’s easier to explain how they do it. Small companies are more subject to their financial circumstances, i.e. the boss could want to give you a raise but the money just isn’t there, or it may be there this month but not next month. That’s why you see things like stock options or more realistically for our type of business, quarterly or annual bonuses if the company is doing well.
But for big companies, typically there are jobs like Engineer 1, 2, 3 and 4. Or associate engineer, engineer, senior engineer, staff engineer. Each will have a salary bracket typically defined by a midpoint and a range like 80% to 120% of midpoint. Each year the midpoints get adjusted, usually based on industry salary studies (factoring in geography). Employees should get at least annual performance reviews. The performance rating and so-called compa-ratio (percent of midpoint) determine the percent raise. For the same performance, an employee at 80% of midpoint will get a much bigger raise than an employee at 120%, in fact the 120% employee may be capped out and only get a raise if the industry rate goes up. The message to the above midpoint employee is your contribution is valued, but you are already paid above market rate for your position. If that employee wants to make more, he should talk to the boss about the criteria for promotion to the next level or a different job with a higher midpoint and salary bracket. A promotion usually includes a (perhaps small) promotional increase in addition to the performance increase, but now the employee will be lower in the new bracket and if he continues to get high ratings, the pay increase will be larger. An interesting situation is an employee who is demoted or, as often happens, decides they don’t like the higher level job and asks to go back. Often they will not have their salary reduced, but now they are at or even above the top of their bracket and will never get a raise until the bracket moves high enough they are no longer capped out. But at small companies, maybe minimum wage plus free company logowear and Mountain Dew in the fridge, and a coupon for a turkey at Christmas. From: That One Guy via Af Sent: Thursday, October 02, 2014 9:49 PM To: [email protected] Subject: [AFMUG] valuing a pay increase im curious from the small business owner, which I assume most of you owners on the list consider yourselves, how do you value a pay increase? (assume its an employee that is worth their salt) Do you try to just keep it where the employee has the same spending power, ie just cost of living to match inflation, percentage based, profit based, set value? In discussions with the boss about future he mentioned a number, for shits and giggles I compared what my last raise is worth today. I havent had a raise in 2.5 years, and based on the government calculators what I make now was worth 80 cents more 2.5 years ago than it is now. The number he said was a dollar, which under normal curcumstances to po folk like me isnt a small raise. but when I looked at the numbers, that dollar only puts me 20 cents up on where I was 2.5 years ago, that 8 cents a year in increased purchasing power. That kind of boils down to an insult. Or is that the wrong way to look at the value of the potential pay increase? I have never believed in asking an employer for a raise, my thoughts have always been that an employer thats a good employer will pay you what they think your worth to them, apparently im worth 8 cents -- All parts should go together without forcing. You must remember that the parts you are reassembling were disassembled by you. Therefore, if you can't get them together again, there must be a reason. By all means, do not use a hammer. -- IBM maintenance manual, 1925
