Calculate Salary Raise Percentage: Another means to retain employees who are considered to be valuable to an organization is through a salary increase. However, it is critical to see to it that the pay raises are equitable and do not create discrepancies among the employees. Central to attaining this aim is understanding how to design compensation packages and determine how much every employee should be given in terms of salary increase.
Calculate Salary Raise Percentage
Criteria for salary increase
Employers typically do not offer increased pay without cause to their workers. Instead, they formulate a layout of the pay structure that factors in the following:
- Budgets
The economic cycles and other factors erode or increase demand and therefore dictate to the employer the amount of raise he can award the employees.
- Employee performance
For example, an employee who has attained or surpassed the set goals, taken on any additional responsibilities, or played a significant role in the company is eligible for such payments in return for their contributions.
- Loyalty or tenure
It is not uncommon to enhance salary increases for employees once they reach career development levels or complete ten years in service, for instance.
- Cost of living
Geographic Cost of living adjustments are increases that follow wages based on the cost of living and the employment of the area in which the goods and services are consumed.
- Qualifications
Gaining a new skill, degree or certification may sometimes require that a person be given a raise.
- Market rates
It is especially important to check the average rates of pay for such job titles in the given sector or region.
Flat rate increase versus percentage raise
A flat rate raise indicates that the employer will increase an employee’s salary by a constant dollar amount e.g. increase of $2000 on an annual or $250 on a monthly scale. A percentage-based raise on the other hand is considered to be the opposite. It is however a portion of the actual salary amount, for example, 2 percent on 50, 000 dollars. Whichever way is preferable among the salaried employees, both approaches can be used. However, percentage increases tend to make budgeting easier for management and finance departments.
How to calculate the raised percentage
The raise calculation like a percent of an employee’s salary is easy as follows:
- Convert the percent increase to a decimal
- Multiply the current salary by the decimal amount
- Add this to the old salary
Example of how to calculate salary increase percentage
An exempt employee earns $65,000 per year and there is a transition of 4 percent rise in income. How much is the annual salary of this person after the transition?
- $65,000 x 0.04 = $2,600 raise
- $65,000 + $2,600 = $67,600 new salary
One can calculate this increase more simply also. Take the current salary, add 1 to the percentage of the salary increments in decimal form, and multiply. For instance, $65,000 x 1.04 = $67,600.
Other benefits to consider
One explanation for the ineffectiveness of the merit pay increases is that there are sometimes budgetary or other restrictions, which do not allow paying more than the actual amount earned as desired even for the most productive individuals. On the other hand, some other forms of enhancing the motivation of the employees and keeping them within the companies where they are working exist. Some such tactics that are available to employers are as follows:
- Incentive pay
- Additional employment benefits
- Telecommuting
- More time off work
Frequently asked questions about salary raises.
Q1. How often should employers give raises?
The determination of salary increases is dependent on the employers’ policies and their level of aggressiveness in their compensation strategies. Some will provide for annual raises as part of a performance review while others will only adjust salaries or wages if the employees meet specific targets.
Q2. How much is a 2% increase in salary?
To find out what a 2% wage increase is equivalent to, multiply 0.02 with the present base salary of the employee.
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