Every day, I’m amazed by the innovation I have seen since the Covid-19 pandemic began. In order to survive, virtually every company has been asked to evolve and change the trajectory of its business. Every person has made changes to their routine and how they operate on a daily basis.
For those companies whose fiscal calendar begins on January 1, the traditional annual merit cycle is upon them. The good news: organizations who are managing to thrive despite a worldwide pandemic (i.e., not the restaurant and hospitality industries) are still planning on giving their employees raises.
Yet, the annual merit increase isn’t as “traditional” as you might think. Some of you might remember the days when you received a raise on the anniversary of your hire date. One of my colleagues recounts when moving to a yearly increase was unheard of, needing at least a year of change management for employees to understand why it would be any other way—or why it even happened this way in the first place.
As CHRC has been researching how companies are coping with this year’s cycle, the overwhelming answer is: it depends. According to a recent study by the Economic Research Institute, annual salary budgets remain around 3.0%, but many companies are only implementing actual increases around 2.2%. Some of that gap may be avoided by thinking strategically. Here are some questions to consider:
- Do you need to work on an annual review cycle, or should salary reviews only be done if revenue targets are met? Can that be quarterly, or can you wait until business recovers?
- Should you focus on promotions or retaining your high performers who, according to many reports, are still able to find new jobs with relative ease?
- Are your compensation programs and structures aligned with the external marketplace? Have any of your roles been affected by increases in your state or city minimum wage as of January 1? With remote working, do you now compete nationally for talent?
- What programs is your company implementing to address burnout and the around the clock work from home cycle? A recent study by AON indicated that the #1 concern when it comes to retaining female employees is not only childcare…it’s wellbeing. That concern doesn’t stop at the gender line. Do you need to think beyond Total Rewards to Total Wellbeing?
The more creative you are with how your financial resources are invested, the better you will be able to redeploy your assets. Are your merit increase cycles ready for a little innovation, or are they carved in stone?