10 Simple Ways to Determine Employee Pay Raises





There isn’t any one reason an employee should get a raise. Factors like company success, starting salary, and recent accomplishments all play a role. That’s why we asked 10 entrepreneurs from Young Entrepreneur Council (YEC) the following question:



“What method or process do you use to determine employee pay raises?”

Here’s what YEC community members had to say:

1. Balance Loyalty and Merit

“In addition to equity for early employees, we also use the length of their tenure to calculate their compensation. This might sound outdated and rather bureaucratic for a startup, but it helps retain early employees, which is a positive signal to the rest of the team. Of course it can’t be nepotistic, and performance always counts. But both need to be considered.” ~ Fan BiBlank Label

2. Review Market Comparables

“On a regular basis, you should be reviewing the salaries of your employees by comparing them against roles at other companies with similar characteristics. You can get access to this kind of data by working with salary consultants or subscribing to various compensation databases. Once you have access to this data, you can use it to make decisions as part of a regular compensation review.” ~ Mattan GriffelOne Month

3. Recognize Value and Promote Quickly

“One thing we’ve learned at Dash is that we should always be on the lookout for employees who go above and beyond the normal call of duty, and recognize it immediately. It doesn’t always need to come in the form of a pay raise, but showing top performers that you recognize value is not a yearly checkbox — it’s something that should happen every single day.” ~ Jeff McGregor, Dash

4. Listen to Fellow Employee Praise

“Although this is not the only strategy that we use when it comes to raises, we do implement a “peer praise” option in our weekly employee survey. In this survey, employees can give a “shoutout” to a peer who they thought went above and beyond, did a great job and really achieved their goals. This kind of organic (and anonymous) praise helps us determine who is really shooting for the stars.” ~ Miles JenningsRecruiter.com





5. Use Goal-Oriented Evaluations

“All of our employees have goals based on their job descriptions and duties. We then have reviews based on those goals. Were they met? If so, were they exceeded? If not, why? We use these goals as a way to measure both individuals and teams to track and measure progress. If they exceed their goals, then they are qualified for a pay raise. The amount is determined based on performance.” ~ Marcela DeVivoNational Debt Relief

6. Look at Employee Self-Assessments

“An objective performance evaluation should be used as a basis for pay raises. However, it shouldn’t be the only thing used. Instead, I find that using anemployee self-assessment of performance is critical to whether or not it’s time to raise employee compensation. Is the employee maxing out potential? Do they feel they have more to give? Leverage self assessments to drive greater performance.” ~ Obinna EkezieWakanow.com

7. Look for Effort Beyond the Call of Duty

“We had an intern who went beyond the call of duty to achieve something special for the company. He ended up getting an unexpected raise. For a startup to become successful, it’s really important that everyone puts in more than 100 percent, and that’s how I think when it comes to raises.” ~ Ashu Dubey12 Labs

8. Use Tiered Percentage

“I offer bonuses to employees who out-perform their peers on a quarterly basis. For end-of-year and mid-year raises, I would recommend raising by percentages. Set specific (realistic) goals that you want employees to achieve, and use tiered percentages to reward them. I often throw in little bonuses for those who far exceed my expectations.” ~ Peter DaisymeHostt

9. Create a Wage Analysis Report

“I require my corporate services department to keep updated wage analysis reports by department, which show what we currently pay our employees compared to what the average wage is for their job titles nationally. I then have them distribute the report to all departments to use as a reference when deciding an employees wage. Remember, pay as much as you can to remain competitive and retain talent.” ~ Joshua WaldronSilencerco, LLC





10. Schedule Six-Month Reviews

“In our five years in business, our compensation plan has changed every year. Originally we offered a ton of equity. After raising money, we switched to offering more cash. Now we’re somewhere in the middle. We have six-month reviews as an executive team to plan our financial future, after which we run ouremployee reviews. We will eventually standardize, but we accept the need for flexibility right now.” ~ Aaron SchwartzModify Watches


Raising Hands Photo via Shutterstock

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The Young Entrepreneur Council


The Young Entrepreneur Council The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

One Reaction

  1. Aira Bongco

    I see. Loyalty is also very important. It is something for me to learn for I always reward merit. I guess it is just me.

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