Salary increase budgets

Refers to the total amount of money allocated to salary increases for all employees.

• Typically expressed as a percentage (of payroll spend).
• Salary increase budgets may be organization-wide or department-wide and select areas of an organization may receive a higher or lower budget amount.
• Salary increase budgets are frequently set on an annual basis.
• The salary increase budget is usually determined based on the financial success of the organization, market conditions and organization-specific policies and practices.
• The budget may include a cost of living adjustment (COLA) or funds to help offset high inflation. It may also include funds to be allocated to employees receiving a promotion, or to address internal or external equity issues.
• Some organizations have a separate budget for merit increases, promotions or other types of salary increases.
• The salary increase budget typically requires approval by HR, finance, senior leadership, or the executive or management team, which may include the CEO and CFO.
• The salary increase budget may be communicated to managers or department heads who then determine the increase amount each employee receives, or it may be distributed directly to each employee.

Here’s what you need:

Annual compensation planning surveys

In order to determine what your annual salary increase budget should be you’ll need to rely annual compensation planning surveys. There are many available sources and many of them provide survey participants with the report free of charge in exchange for their participation.

It's best practice to collect a few sources of compensation planning data in order to get a balanced view of the market. You should definitely make Mercer one of your sources. Sign up to be notified when our next Compensation Planning Survey is open for participation./

Salary increase

Refers to an employee’s raise in annual salary.

• A salary increase is employee-specific and the amount is generally different for each employee.
• Salary increases are typically provided annually, but can also be provided for a promotion or as an off-cycle adjustment, for example during an internal equity review.
• May be expressed as a percentage increase (of base salary) or fixed amount.
• A salary increase can often be dependent on an individual’s performance throughout the year, as well as market trends.
• An individual’s position within their salary band, may impact their salary increase (if an employee is at the low end of the salary band they may get a higher percent increase compared to an employee that is already at the higher end of their salary band). Organizations around the world use different budgeting strategies. A salary increase budget is the total amount of money an organization has available to disseminate to employees, usually on an annual basis. It’s generally discussed as a percentage, which represents the increase to the organization’s annual salary expenditure. A salary increase refers to the percentage increase in compensation for an individual employee.

Here’s what you need:

Comprehensive salary surveys

In order to determine whether a job is competitively paid, that they’re positioned in the salary structure appropriately, and whether they are in need of more than a merit increase you will need to have a regular practice of market pricing your jobs. That means you need salary surveys that cover the majority of your jobs and employee population. Typically, that means using a a mix of general industry and industry specific salary surveys.