Annual Reviews and Compensation (Part 2 of 2)

Questions This Guidance Answers: 
  • Should I give all my staff the same rises?
  • How do I determine who gets what's during rises?
  • Can I substitute a bonus for a rise?

In this cast, we finish up our conversation on approaching compensation decisions during annual reviews. Listening to last week's show first will help! ;-)

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Mike and Mark, Very practical

Mike and Mark,

Very practical podcast.

More and more companies even in this part of the world are getting to think a lot about salary increase as it compounds to the expenses as you mentioned. Its now coming to performance bonus or incentives as a reward. I guess we may have a ratio of 30 to 50% of compensation as Bonus/ Incentives as % of total pay, the way the variable pay is taking shape here. I remember when I started 22 years back in India, the concept of Bonus/ incentives were unheard of and now that is key driver and an indicator to measure your success in most of the organizations.

The inflation /market parity would take care for salary review and then distributed as per performance.(factored by Company, business, region and yours)

You had rightly mentioned the fact that Company performance determines the pay increase could be a news to many people. People take it for granted that salary increase has to happen in a routine manner irrespective of the external realties. Yes, I was also thinking that 15 years back to be honest!!!. I think its all boils to down to communication on pay structure/ pay increase process that is in place to create awareness to people thats where HR need to facilitate the process.

Bangalore, India.

Very nice podcast. Simple and

Very nice podcast. Simple and straight.

As a company owner, I have always prefered bonuses over wage increases : A wage increase is "permanent" (will persist in the future). You cannot know if the company profit will continue.

And, at the same time, you also have to take into consideration that people prefer wage increase over bonus because the cost of goods increases each year.

I have tried to put those facts into a system. I will explain it in the Forum.


May we have one on the problems of

May we have one on the problems of where the pay rate is determined by a Director with no input from the line manager? I have a failing report who has mixed messages as I am giving feedback she is failing and yet she gets the standard across the board rise implying she is at an acceptable standard.

I love this cast as it has such an important message - just wish I could see it in use!

Staflea- You're in a tough spot, and


You're in a tough spot, and there is a podcast on that, but it's also ALL about clear feedback before and after the review. Reviews are only worthwhile when they are PART of a larger system of feedback and communication. Make sure your director knows the story, and do your best to influence things.

And, keep that director in the loop if you're thinking about termination... it's possible that there's a message for you in the Director's pay increases.


Hi, Guys! Just as additional

Hi, Guys! Just as additional information, here in Colombia (South America) it is illegal to reduce anybody's salary. The person is free to sue the company and they would most likely win, regardless of them being a very poor performer.

Also, being Colombia a developing country, we have more inflation than the US, so a minimum increase for anybody would be about 8%. However, by law, no company is obliged to make a salary increase for their employees, though most do and it coincides with the inflation rate for the year.

Beyond that, if you work for a big multinational company, here, a salary increase could be up to 15% or more, if you're a really top performer or if your position was not very well defined in the beginning. These cases are rare, of course, but I know of people who've gotten increases from 25 to 50%.

All the best, Carolina.

Thanks for the reply, Mark. The

Thanks for the reply, Mark. The director is very aware of my report's shortcomings and has expressed a desire to see her gone. I'm now starting the last stage coaching - to see if she can turn it around and give her the chance to do just that and if it doesn't then I have the documentation for HR.

I think that's what I find frustrating - the mixed messages that not using the "bucket" approach here gives those of us who have no input into the decision. it seems a company wide thing (I got a higher percentage but that was pre-agreed as part of my recruitment package).

If only everyone listened to MT!!

I really appreciated the timing of

I really appreciated the timing of these podcasts. My company does do annual merit increases at the end of the year, so this is certainly an annual ritual for us. My company also employs the "bucket theory" for salary increases as direct instruction to all managers - they expect that we will distribute the increases in a way in which rewards top performers more than others.

This year, I did feel a bit constrained by the budget given for increases regarding my ability to reward some of best employees. I presented the idea of a year-end bonus as an alternative to a salary increase for specific employees - in writing, as noted in the cast - and my idea was accepted without discussion. Thanks M&M for the great insights and idea!

I can go one better on the "Dark Mark"

I can go one better on the "Dark Mark" on annual compensation increases. I fired my bottom performer, used the money to give very good increases to my two top performers. I did not replace my bottom performer. (I got that from another MT cast.) I applied the rest of the funds to client development and I am looking to "replace" the bottom performer with somebody by the end of the first quarter this year.