Eric P. Bloom: How to give a raise
By Eric P. Bloom
GateHouse News Service
As Tom Cruise said in the movie “Jerry McGuire,” “You complete me” – oh, sorry, I meant, “Show me the
money.” Ah, yeah, that’s the one, “Show me the money.” That said, giving raises is not just about the money,
it’s also about the message behind the money.
For example, is 5 percent a good raise? The short answer is yes, it would be nice to get a 5 percent raise.
Now let’s put it in perspective by the following two statements. “Hi Mary, congratulations on your 5 percent
raise, I want you to know that the average raise this year was 2 percent. You got 5 percent because of your
outstanding work over the past year.”
Compare that statement to this statement. “Hi Mary, we gave you a 5 percent raise this year. The average
raise was 8 percent. You only received 5 percent because your work was not of the quality it has been in past
years. Let’s sit down next week and talk about an action plan that will help you return to your previous top
performance.”
Changing topics to the salary planning process, pay raises are generally scheduled in one of two ways:

Raises given on the anniversary of hire date.

Raises given to everyone in the company at the same time.
If your company gives people raises on their employment anniversary, then the math is simple. You’ll be
given a general guideline/formula that considers the person’s performance, current salary and other various
factors. For the most part, you follow the formula, and it tells you the raise amount. For example, let’s
consider the following very simple formula:

Top performers get a 4 percent raise.

Average performers get a 3 percent raise.

Below average performers get a 2 percent raise.

Bad performers get no raise at all.
Using this formula, if you consider the employee to be an average performer, he/she gets 3 percent. This
simple formula is for illustration only and of course did not consider the person’s current pay rate and other
important company specific factors.
In companies that give all employees pay raises at the same time, you generally will also be given a guideline
like the previous example. But in this case, you will also generally be given a budget amount based on a
percentage of your department’s total annual payroll. For example, if your department’s total annual payroll
is $100,000 and the average raise should be 4 percent, you will then have a $4,000 pay raise budget to
divide among the members of your group.
The use of a budgeted raise amount has two major ramifications.
First, if everyone in your department is making about the same amount, if you give a 5 percent raise to one
person; then you must give someone else a 3 percent raise to stay within budget.
Second, the higher someone’s pay is as compared to the average, the greater effect that person has on your
overall budgeted dollars. For example, if Joe is making $20,000 and Sally is making $40,000, each 1
percent pay increase will cost $200 for Joe and $400 for Sally.
Your job as the department manager will be to combine the math, team member performance, department
goals and company goals to create a pay raise plan that that is fair to your team members, considers
company goals and meets your budget.
The primary advice and takeaways from today’s column is to know that:

The message about the raise is as important as the raise itself.

In many cases, salary planning is a zero-sum-game; the more you give to one person the less you can
give to someone else.

Make sure you understand and follow company guidelines.
For additional information on today’s topic, I suggest the book “Performance Appraisals and Phrases For
Dummies,” by Ken Lloyd.
Until next time, manage well, manage smart and continue to grow.
Eric P. Bloom, based in Ashland, Mass., is the president and founder of Manager Mechanics LLC. He is
also a nationally syndicated columnist, keynote speaker and author of the award-winning book “Manager
Mechanics: Tips and Advice for First-Time Managers.” Contact him at eric@ManagerMechanics.com or
visit www.ManagerMechanics.com.