Merit Increases as an Option for Your Employees

Young woman at desk clenches her fists and smiles with joy.

A merit increase is something that many companies give to their employees to recognize the outstanding work they are doing. When businesses implement these rewards properly, they can serve as a strong incentive for employees to perform at their best. However, whether you distribute merit increases through HR or directly, you want to have a strategic plan for doing so, using performance as a guide. This post will guide you through the information necessary to implement merit increases successfully.

Merit Increase Meaning

Understanding the merit increase meaning is at the top of the list before you can successfully put policies in place for it. What is a merit increase? In simplest terms, a merit increase is a financial reward given to employees after they reach agreed-upon business goals. Merit increases are also given to employees who go above and beyond with excellent performance. Most performance-based jobs work well with merit increases because they have an easy way to measure achievements.

A merit increase is different from a bonus. Although a bonus is also often given to employees for their hard work, it differs from a merit increase because it is just a one-time award. A merit increase is usually a salary increase. Some other types of merit increases are discussed below, but for the most part, the reward is long-lasting.

Types of Merit Increases

The most common type of merit increase is a pay increase. This salary bump motivates employees, inspiring them to strive for greater success in the workplace.

However, this isn’t the only type of merit increase employers may offer. Some businesses may give a high-performing employee a promotion. This is another type of merit increase and would come with a pay increase, too. Using merit increases keeps employees motivated and moving forward on the ladder of success. The more they succeed, the more the company succeeds.

Tips for Handing Out Merit Increases

For any good program to be effective, it’s helpful to plan the process carefully. To utilize a merit increase, you need guidelines in place. The following tips will help businesses when implementing a merit increase.

Be Consistent

Start with a clear and concise plan for merit increases. These should be directly connected to the employees’ performances. It’s best to put the merit increase policy in writing so that everyone can see it and understand what is expected of them. It also helps avoid any misunderstandings.

Once you have the policy prepared, stick to it consistently. Don’t use it for some employees and not others. You need to think everything through before developing the policy, so you are sure it’s something you can do. In other words, you must consider how it will impact the business if several employees meet their objectives and are due for a merit increase. You must follow through once you have implemented the policy. However, you can put a section that states that you will review the policy and make necessary changes annually.

Be Practical

You want to reward the employees, but at the same time, you need to be practical. As mentioned above, your goal is to provide an incentive for employees to achieve excellence. A merit increase can help employees achieve higher levels of excellent work. But you don’t want to overextend the company too much by offering impractical increases.

Solicit Advice from Department Heads

If your company has several departments, it is helpful to get advice from the various heads of the departments about the best way to structure the merit increase. They may have vital input about how the merit increase should work based on the mechanics of the department’s inner workings. Whatever the case may be, get advice from the parties who will be involved before developing a policy and before moving to the next step of training.

Implement Training

Once the merit increase policy is developed and written, you need to train the management and leadership on what the policy is. Since they will be the ones primarily distributing the merit raises or promotions, they need to be well-versed in how the process is supposed to go. You may need to have periodic meetings with the management to ensure that they are implementing the policy properly.

Follow-up and Restructure as Needed

Every year, you can assess the entire merit increase policy to see how it’s working. You can also determine how the business is performing. Reviewing these will help you determine whether the merit increase you’ve put in place is working well or needs any changes. If it’s based on a percentage point system, you might change the amount, or you could keep things the same.

Benefits of Merit Increases

Merit increases benefit not only the employees but also your business in the following ways:

Boosts Employee Morale

Employees will be motivated and inspired to work harder when they know there is a merit increase at the end of their work. Merit increases can give employees an incentive to achieve their goals, thus boosting office morale.

Identifies Business Priorities

When the company sets the policy for administering the merit increase, it also identifies the business’s priorities. By highlighting the types of performance the company will reward with a merit increase, employees and others know what is relevant to the business.

Enhances Employee Retention

Employees will be more likely to stay at a company that offers opportunities for growth and development. A company that rewards excellent performance by providing employees with merit increases will see greater employee retention. Employees will have a goal to work towards as they strive to get to the next level and achieve the merit increase.

Unemployment rises as The Great Resignation becomes “Quiet Quitting”

The unemployment rate checked in with a bang for August, moving to 3.7% from 3.5%, while 315,000 jobs became available. Is the the first big jolt in the wrong direction so many – particularly those in the “Yes, we are in a recession!” camp –  have been predicting? Job gains showed most forcefully in health care, retail trade, and professional and business services.

While the number of unemployed rose by 344,000 to 6 million.

Those considered active jobs seekers – they’ve looked for work during the last 12 months, but not in the four weeks prior to data collection – stayed steady at 1.4 million. They are described as “wanting and being available for work.”

Permanent layoffs increased by 188,000 to 1.4 million. New figures on what we all now know as The Great Resignation aren’t out yet, but the July number was 4.2 million, bringing the quit rate to 2.7%.

So why is everybody talking about Quiet Quitting?

Peacefully Sitting, Quietly Quitting

Quiet Quitting seems to be a perfect term for the complete lack of passion it describes. The Great Resignation was, and – as far as we know at the moment – still is, fuelled by enough passion to make people walk out of their jobs in the hope of something better. Something more flexible. Something more… remote.

These folk don’t have the same fire in their bellies. And that may be the underlying issue.

“Quiet quitting’ is a term that has taken social media by storm and is become something of a phenomenon in countries like China and Australia. Unlike other terms such as ‘job hopping’ or the ‘Great Resignation’, which can be defined easily, this acts as a teaser term, leading to lots of online questions around what it actually means.

Most sources say it began in China, with the term ‘tang ping’ or ‘lying flat’ taking hold across the country, among young people demanding a better work-life balance.

Ultimately, it means employee disengagement. Since job hopping and the Great Resignation were terms coined to describe new phenomena in the work place, this term could be seen as disingenuous. In reality, it appears to have been coined by people wanting to discuss an old issue by attracting people to the idea – which is actually very clever.

It would be a shame to think that people intelligent enough to come up with new terms for an old problem, then take social media by storm in various countries, are actually disengaged in their own jobs.

This really does conjure up an image of wasted talent.

Of course, the fact that it’s becoming so popular in the US – on the heels of the Great Resignation, is more than a coincidence. There is a feeling that burnout, or a desperate response to the onset of burnout, is permeating these trends.

So What Does It Mean to Quiet Quit?

Employees will often become disengaged if they feel overworked and underappreciated. The core of quiet quitting appears to be a refusal to do anything more than the basic duties a person was hired to perform. That doesn’t sound so bad on the face of it, but what it implies is toxic: employees who think of their jobs as nothing more than a paycheck. 

Let’s be clear. If the problem is that a business can’t cope with people fulfilling their employment agreements and doing what they were hired to do, it means the problem is with that business. They are expecting complete devotion and gratitude and unreasonable “flexibility”. 

If the problem is a lazy person clinging to the limits of their job at the expense of team spirit, or refusing to help others by going the extra mile now and again, the problem is with that person.

Clearly, there is no simple answer to solve this question.

However, quiet quitters do guarantee that teamwork will break down, because so much relies on people helping each other – rather than individuals performing pre-set tasks that exist within a relentlessly smooth, uninterrupted process.

That’s simply not realistic.

And once teamwork starts to break down, the company follows.

When people stop helping each other with simple tasks because ‘that’s not my job’ or ‘that’s not in my sprint,’ resentments start to build and cracks start to appear. It’s possible to think: ‘Well, it’s for the best if those types quit.’ That’s fine, but not if you’re responsible for creating those people by bringing them into your badly run company.

Quiet Quitting Vs. The Great Resignation

With fears of recession in the US, some believe the end of the Great Resignation is in sight, as employees start to fear losing their jobs. It now seems possible that one phenomenon will be replaced by another, equally toxic, phenomenon. If you cannot engage your employees, you will end up with teams of quiet quitters, slowly and indifferently destroying your business.

If a recession gives you the leverage to force reluctant workers back into the office, for example, what sort of engagement will you inspire? How much long-term value can you squeeze out of people’s fear of losing their jobs?

Try to imagine how that could go wrong.

Engaging your employees does not mean burning them out. If you can manage that, you should think about showing credit where credit is due. Office politics and cliques create quiet quitters wherever they fester. Breaking down office politics, giving praise, handing out cash bonuses for ‘above and beyond’ performance – these types of positive engagement can have great ROI.

A well-designed workflow and transparency in communications will also make a difference.

Hiring good managers is also a great way to prevent the production of quiet quitters in your company. Getting it wrong means trouble. Another method is using Ladders to find highly skilled, highly qualified professionals, pay them what they’re worth, and treat them in the way they deserve.”

And getting that right should also keep The Great Resignation at bay, too. (Maybe.)

So Where Are We Going With This?

With the drop in employment to 3.5% last month, some were quick to see this as the start of a move in the right direction, and evidence that the recession naysayers could be wrong. Fair enough, but Ladders CEO, Dave Fish, gave his advice clearly, and it was reported as follows:

If the current unemployment rate of 3.5 percent cannot be sustained and starts to move into reverse in the near future, Dave believes the consequences could be shocking for professionals across industries:

  • For employers: Employers will likely find themselves ripping up hiring strategies and going into financial survival mode. Current top-of-mind issues like retention rates will go out the window as the balance of power shifts and employees become worried about losing their jobs. Ironically, too much of a perceived shift will almost certainly backfire. Flexibility is here to stay, so employers who make too much of having the upper hand could pay a heavy price.
  • For professionals: Professionals who have been enjoying The Great Resignation will start to experience a colder world with less opportunities. However, as stated, they will also see that many remote-work and other flexible options will remain. Some may need to switch industries or brush up in new areas of expertise to gain those career options, but there is little chance that millions of people will simply accept that the game has changed and knuckle down.

“We have helped our members weather many storms over the past 19 years,” Dave told us, “throughout The Great Recession, the pandemic, and current uncertainty about the future. At the moment, we’re delighted about the new low unemployment figures, but still offering our Premium careers package to businesses at a discount, so they can gift a Ladders membership to any professionals who find themselves having job offers rescinded, or being laid off. 

“As we continue to navigate these economic challenges and bizarre contradictions, our team is committed to helping professionals compete effectively, and to provide the tools necessary to ensure their success, regardless of how the balance ultimately tilts.”

Boom and Gloom: The Technology Downturn

3D rendering of a female robot looking sad and crying against a dark background.

While employment booms across industries, with employers adding even more jobs than anticipated in April – 28,000 above the Dow Jones estimate – the tech sector is showing serious signs of a downturn. Industry upswing stars include leisure and hospitality, manufacturing, transportation and warehousing.

So why is tech tanking?

Obviously, there are no prizes for anybody who has the correct answer. Lockdowns led to increasing numbers of consumers spending their time and their money online. The online world provided not only the best escape from a dreadful reality, but also a practical way to answer fundamental needs, like getting the shopping done.

Of course, that’s the simple version. Lockdowns affected everything, including the broader interests and investments of companies. Here we’ll look at companies that are either all out tech, or heavily invested enough at a core-offering level to be included.

The Great Resignation has left employers trying to find the best strategies to attract and retain new talent—often by throwing money at the problem—while tech is tightening its belt and layoffs in the industry are fast becoming an alarming trend.

Let’s take a look.

Business woman sits at her desk in a bright office, wearing a Virtual Reality headset with her hands up, touching thin air.
“This looks great! But I can’t find my keyboard.”

Metaverse Crashing to Earth?

Issues in the real world appear to have come full circle and kicked the metaverse in the purse, right where it hurts. On May 4th, Insider revealed a Meta internal memo stating that Facebook is freezing hiring and scaling back new talent acquisition across the company. Citing “challenges” that caused it to “miss revenue targets”.

Facebook’s global head of recruiting, Miranda Kalinowski, said—in a separate memo—that the company’s engineering team would be the first among those impacted. Facebook did freeze hiring at the beginning of the pandemic, but this was a sensible move, designed to give the company time to adjust and put new processes in place for health-aware onboarding.

This latest hiring freeze, on the other hand, is all about “our business needs and in light of the expense guidance given for this earnings period”—helped along by its Reality Labs division losing $2.9 billion in the first quarter.

Curse of the metaverse? Or barely a bump in the road? Speaking of which…

Man with a mobile phone watches as his Uber driver arrives.
“I can’t believe they still have to use real drivers.”

Uber Hiring U-turn

Uber is to slam the brakes on hiring after a “seismic shift” in investor sentiment, CEO Dara Khosrowshahi announced to employees in an email obtained by CNBC. Uber also plans to cut back on marketing and incentives spend. From this point forward, “We will be even more hardcore about costs across the board.”

He continued: “We have made a ton of progress in terms of profitability, setting a target for $5 billion in Adjusted EBITDA in 2024, but the goalposts have changed. Now it’s about free cash flow. We can and should get there fast.” Just like their drivers.

During the pandemic, Uber leaned heavily on its food delivery service Eats. After the lifting of COVID restrictions, revenue for Uber rose to 6.9 billion in the first quarter. The downside? A $5.9 billion loss during the COVID period, due to a slump in its equity investments.

Either way, Uber says: “We will be deliberate about when and where we add headcount.”

Animation showing Robin Hood in forest, holding bow loaded with arrow.
“Is it aim and fire or fire and aim? Tsk.”

Robinhood’s Aim

The original Robin Hood (Kevin Costner to you), was knocked spectacularly off balance at least once in his career. Likewise, retail brokerage Robinhood has announced it’s cutting 9% of a reported total of 3,800 employees. Shares fell more than 5% in extended trading after the announcement.

Rapid expansion last year somehow led to “duplicate roles and job functions”. Unfortunately, two heads were apparently not better than one and “these reductions to Robinhood’s staff is the right decision to improve efficiency, increase our velocity, and ensure that we are responsive to the changing needs of our customers,” according to CEO Vlad Tenev.

He added: “While the decision to undertake this action wasn’t easy, it is a deliberate step to ensure we are able to continue delivering on our strategic goals and furthering our mission to democratize finance.”

Woman using an indoor exercise bike with digital montior.
“I wish they’d make a real bike with a TV attached.”

Peloton in a Spin

Unable to bear the idea of running to stand still, Peloton cut around 20% of its corporate workforce – an estimated 2,800 people – and replaced its CEO, hoping a new lean look will impress investors and rejig its business for some muscular growth in the near future.

The announcement, which came earlier this month, followed rumors that the company could soon become the target of a takeover. However, the makeover news quelled much of that excitement, if not all of it. Many feel that Peloton will not escape that fate.

No matter how fast they peddle. Sorry, pedal. 

A Wall Street darling during the pandemic, the news in response to the announcement came with headlines like: “The Rise and Fall of Peloton” and phrases like “crash and burn”.

Still – no pain, no gain.

Terrible puns about the indoor-exercise success story aside, Barry McCarthy, former chief financial officer of Netflix and Spotify, is now the new president and CEO, while founder and former CEO, John Foley, is executive chairman of the board.

Most of the news since the announcement has been an exercise in things not working out: big borrowing, price slashing, stalled product production, and falling stocks – if people in high places are sweating right now, they appear determined to take the strain.

Peloton is going downhill, according to many key observers, but everybody remains fascinated by those spinning wheels. And they could get back in shape.

A male and female model step out of a limousine onto a red carpet.
“Vanity, vanity, all is… Ohh, nice dress!”

Cameo Yells “Cut!”

Cameo became a star after coming up with the novel idea of letting people pay their favorite actors, artists, athletes and celebrities to send them personalized video greetings. A crazy idea that hit big with the public, the company was valued at around $1 billion last year after gaining the attention of investors such as Amazon, Google, and UTA.

This month, it announced it was cutting approximately 25% of its workforce—87 members of staff in real terms, announcing a need to “right-size” the business after a pandemic-related reversal of fortunes.

Hit the reverse button back to 2020 and we see Cameo claiming the generation of around $100 million in gross revenue—4.5 times up on the previous year. Unfortunately, one-season-only shooting stars include high-flyers such as chief product officer, Nundu Janakiram, SVP of marketing, Emily Boschwitz, and chief technology officer, Rob Post.

Co-Founder and CEO, Steven Galanis, told Variety: “To support both fan and talent demand during the pandemic lockdowns, Cameo’s headcount exploded from just over 100 to nearly 400. We hired a lot of people quickly, and market conditions have rapidly changed since then. Accordingly, we have right-sized the business to best reflect the new realities.”

Some of the biggest stars in the world have found themselves on the cutting room floor, so this shouldn’t be the end of the story for anybody’s career. NEXT!

Contrasts and Questions

Contrasting the above with the rest of the economy is startling. In the world outside tech, employers are eagerly seeking new ways to attract and retain talent. The Great Resignation/Great Reshuffle continues to have a massive impact across industries: rising labor costs, inflation, and resignations are leaving hiring teams everywhere struggling to find their feet on continuously shifting ground.

Of the industry upswing stars highlighted at the start of this article, leisure and hospitality has had the biggest bounce back success, with job growth at 78,000. Does this signal that people are returning to their pre-pandemic habits, or that more people are learning to appreciate the “get up, get out there” lifestyle more than they did before it became prohibited? 

The tech industry skyrocketed during the pandemic and other industries suffered, so now the tables are turning. This is clear, so the real question is: How does it all balance out? If the issue can be readily identified, the tech industry can steer its way back to normalcy, right?

This isn’t Boom and Bust, it’s Boom and Gloom.

Or is it? 

Facing the Future vs. Facing Forward

As is often pointed out, tech industry trends are notoriously hard to track and analyze, because the business models are so specific to what they do and offer. Having said that, Ned Davis Research’s Veneta Dimitrova did analyze available data, including reports from the Bureau of Labor Statistics, and concluded: “There doesn’t seem to be any leading tendency from that industry for overall employment growth.”

Then there’s inflation and the tightening of purse strings across the country. Amazon takes a hit in that respect. Back to the metaverse and we need to factor in Apple’s iPhone privacy changes, which impacted ad targeting—a potential $10 billion revenue hit—which is not to be sniffed at by anybody in this universe or, indeed, the metaverse.

If it was easy, we’d all be visionaries and business leaders, right?

Still, this places hiring teams in a bizarre world where everything is shifting with relentless speed, realities are either red hot or stone cold depending on needs, and each reality poses its own set of problems to be solved.

Ultimately, hiring managers with good recruiters on hand are always in a strong position. As mentioned in other articles, using experienced recruiters as talent advisors at the planning stages, rather than internal vendors to be issued tasks after the fact, could prove a winning strategy moving forward.

Of course, that depends on which direction you think forward is.

Good move, Netflix.”

Raising the Question? 82% of Professionals Say They Deserve a Raise Next Year

A new research study from Ladders reveals that 82% of high-earning professionals surveyed believe they deserve a raise next year, but only 25% asked for one in the past year — which raises interesting questions about raises, promotions, and how professionals go about getting them.

With the Great Recession a decade in the rearview mirror, America’s top professionals are feeling more confident in their abilities, and their worthiness for additional compensation. But they still aren’t asking for it.

82% of respondents agreed that they deserved a raise next year, while only 25% had asked for a raise in the past 12 months. Nonetheless, approximately two-thirds of survey participants indicated that they had received a raise in the past year.

Almost half of respondents settled for a meager raise of 3% or less in the past year, while only 8% reported a 15% or greater increase from their employer.

Promotions are coming much faster in the modern era, with almost a quarter of respondents indicating they had been promoted with less than 12 months on the job. An additional 23% indicated it took them leaving their employer to get promoted.

Ladders professionals responded to the following:

“I deserve a raise next year”:

Strongly agree45%
Agree37%
Neutral18%
Disagree 0%
Strongly disagree 0%

“I asked for a raise in the past year”:

Yes 25%
No 75%

“I received a raise in the past year”:

Yes 65%
No 35%

“My most recent raise was”:

0%-3%49%
4%-6%20%
7%-9%7%
10%-15%12%
Greater than 15%8%
Other4%

“I deserve a promotion next year”:

Strongly agree25%
Agree25%
Neutral43%
Disagree4%
Strongly disagree3%

“For my most recent promotion, I was promoted after __ months on the job”:

Less than 12 months24%
13-24 months22%
25-36 months11%
37-48 months5%
4 years or longer15%
I changed companies to get my promotion23%

Methodology
Ladders, Inc. research study conducted October 20th to October 27th, 2019 among the members of the Ladders professional community. 1,233 responses were recorded. Gender distribution was 75% male, 25% female. Average annual compensation of respondents was $148,000.