Distribution of Merit Increases from 2010

A recent Towers Watson survey provided updated results of
merit increases for 2010 from 381 large and mid-sized
companies across the U.S.

The average merit increase in 2010 was 2.7% across all

The breakdown of the average salary increase by level of
performance in 2010 was:
Far Exceeds Expectations – 4.0% Increase
Exceeds Expectations – 3.4% Increase
Meets Expectations – 2.5% Increase
Partially Meets Expectations – 1.0% Increase
Did Not Meet Expectations – 0%

The survey identified that 8% of employees fell into the
Far Exceeds Expectations category and 25% of employees
fell into the Exceeds Expectations category. 

The survey did not indicate how the balance of the 67% of
employees was distributed.  However, consistent with
previous surveys, we could assume that 80% of them fell
into the Meets Expectations group.

HR POINTER: It is interesting to note the size of the
increases between Meets Expectations and the next two
higher categories from two perspectives – statistically
and practically.

Statistically, the percentage amounts between these
categories are significant.  As an example, the 3.4%
number is 36% higher than the 2.5% increase and the 4%
number is almost 18% higher than the 3.4% increase. 
Unfortunately, employees don’t pay their bills with
percentages, but rather with real dollars.

The practical or real dollar differences between these
categories are negligible.  As an example, the size of the
increase for the top 3 performance levels for three
employees earning $50,000 per year is as follows:

$1,250 – Meets Expectations
$1,700 – Exceeds Expectations
$2,000 – Far Exceeds Expectations

As such, the $750 difference between the top performer and
the average performer is not much of a motivating factor. 
If this $750 is spread over 52 pays, it’s a “whopping”
$14.42 per pay. 

As such, it behooves companies to provide a full range of
monetary and non-monetary recognition strategies to avoid
discouragement among their top performers for working
exceptionally hard all year and only earning $14 a week
more than the average performer.

To view our approach to monetary and non-monetary
recognition, click on the link below:

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