| “Meeting expectations” is a thing of the past. As competition becomes fierce and corporate profits rise, across-the-board pay increases are starting to diminish.
The prevailing trend is to pay for performance rather than expand overall budgets for raises. Companies like La Madeleine de Corps, National Starch & Chemical Co., Imperial Chemical Industries, and Symantec are widening the gap between average and top performers by giving bigger raises to top performers.
Last year, La Madeleine Bakery gave a 3.5 percent increase across the board, but this year they are expecting to give their top performers 3 percent to 5 percent, average performers 2 percent to 3 percent, and poor performers 1.5 percent or less.
As competition increases, companies like La Madeleine have to reward their top performers as overall budgets for raises stay low. As Ravin Jesuthasan from Towers Perrin says, “The high performers are making a lot more, but it’s going to come from the lower performers.”
According to Hewitt Associates, last year, nonexecutive white-collar workers experienced the following:
- Top performers received a 9.9 percent increase on average
- Average performers received a 3.6 percent increase on average
- Poor performers received (if anything) 1.3 percent on average
- This year Hewitt projects 3.6 percent increases on average
In the future, significant gaps in salary adjustments can pose a communication challenge for managers, who may fear that such gaps will weaken morale and create conflict. The hardest part for managers will be to explain to their “average” workers, who most likely are a majority of their employees, why their raises remain low when profits are healthy. | 