The Importance of Merit Pay Increases

The Importance of Merit Pay Increases

In my previous article “Hierarchy of Employee Needs” I wrote about how merit pay increases are what drive top performers or rock star employees. Top performers are experts in what they do, and you should reward them for it.

The reasons why merit pay increases are important are that it keeps top performers right where the organization needs them, keep unqualified employees from becoming managers, reward the experts that drive your organization, and attract more top performers.

Keep Top Performers in The Right Place

Top performers and rock star employees are hard workers, and they are normally driven by good pay. This is because they know their worth. They know that the organization is growing because of their hard work.

If a top performer is not being paid for what they think they’re worth they will look for a promotion to a position that pays more. A move to another position may cripple your production or revenue because your top performer is no longer doing what they do best.

Reduce Unqualified Promotions

Unfortunately, a top performer may only be a rock star in their current role. Just because you’re the best salesperson at your organization does not mean you’re qualified to lead the sales team.

Merit pay increases help keep rock stars in the role that they are best at. Sometimes your top performers may make more money than the person that supervises them. This is an okay position to be in because it shows the team that good work is valued.

If one of your top performers makes great money and still wants to be promoted to a team lead, supervisor, or manager-type role, make sure they get the proper training. As a person progresses up the corporate ladder daily work is less important. People management becomes more important, and anyone being promoted should have to do the training first.

Rewards Experts That Perform

Is it fair that every employee in an organization is making the same amount of income when a small amount of them is doing most of the work? This is the old 80/20 rule where 20% of your employees are doing 80% of the work. Top performers get angry when they’re not appreciated financially.

Base pay could be standard across the board, but top performers should advance up the merit pay scale faster. This way the top performers will always be paid more and keep them happy.

Attract More Top Performers

When your top performers stay, they will attract their high-performing friends. The word will get out that you pay well when someone works hard. The best always want to work with the best because that’s when they can learn more themselves.

This is a great situation to be in! This is when you become an employer of choice! Check out this book by Rick Munson and Bill Skinner “Become the Employer of ChoiceOpens in a new tab.” on Amazon to learn more.

What next?

  • You need to come up with a merit pay increase program that works for your industry and organization.
  • Define what triggers a merit pay increase for each position or role and how to track these triggers.
  • Creating a pay grid and keeping all merit pay increases within the grid will help you keep your organization’s salary budget on track.

Ian Hopfe

Ian Hopfe is the owner of LBH Business Services Inc. in Edmonton, Alberta, Canada. Ian is an Indigenous Human Resources Consultant. He has over ten years experience in HR and over fifteen years experience in management. All blog articles on this website are written by Ian unless a guest writer is indicated on the post.

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