Employers: 13 Important Criteria That Should Inform Your Pay Raise Decisions

employee pay raise

Regular pay raises can show employees how much you appreciate their hard work and can also prevent them from feeling dissatisfied in their current environment. However, it’s important to know when a raise will be the most effective and well-earned.

That’s why a panel of experts from Young Entrepreneur Council (YEC) weighed in on the following question:

“What’s one criteria you look at when determining whether or not to reward an employee with a pay raise? Why?”

Consider the following 13 factors the next time your company’s yearly performance reviews roll around.

1. Level of Contribution

“My company is all about not just completing tasks, but contributing toward a whole when it comes to client projects. Deserving employees can look ahead, plan and deliver accordingly on a monthly basis rather than letting daily deadlines affect their output. I look not only at performance, but also at behavior and strategies. The right attitude can make all the difference during time crunches.” ~ Duran Inci, Optimum7

2. Performance Goals

“We award pay raises when a team member beats their performance goals that yield increased output or value to clients and team members. Sounds basic, but defined goals based on metrics that we, as an organization, decide on are rewarded accordingly when exceeded. Since everyone agrees on the metrics and goals, all raises and rewards are transparent, helping culture as well as individual morale.” ~ Matthew Capala, Alphametic

3. Range of Consistency

“Consider consistency — not just in performance, but also in attendance, character and how they work with everyone. I also want to see consistency in flexibility and handling stress. You may be a good person now, but problems and conflicts will definitely change you! A pay raise is for everyone who works well with the company and those who consistently show that their passion for the job never changed.” ~ Daisy Jing, Banish

4. Length of Employment

“In my opinion, employees who have worked with my company for a long time deserve to see a return on their time investment. And while it’s nice to try and reflect the revenue they generate in their pay, it’s not always obvious what impact their work may have on our bottom line. Instead, I stick to rewarding those who spend the most time with us and demonstrate the most enthusiasm for their duties.” ~ Bryce Welker, Beat The CPA

5. Market Rate and Scope of Work

“A team member’s pay is determined by the market rate and the scope of work. If the market has adjusted, the business owner has no option but to go with the market or risk losing that employee. If the scope of work has increased, either by volume or by skill sets, then a pay adjustment should happen accordingly.” ~ Michael Hsu, DeepSky

6. Intrinsic Value

“Consider the employee’s value and how ‘irreplaceable’ they are. That’s the No. 1 factor for me. Replacing a key employee is no easy task. How difficult it is to replace the person should help you determine what type and how many incentives you are willing to offer.” ~ Shu Saito, All Filters

7. Ability to Meet Objectives

“We focus on an employee’s ability to meet objectives. We try to base pay raises off typical productivity, time in the company and the employee’s ability to meet our expectations and needs. An employee needs to be with the company long enough to accurately gauge whether their performance is consistent, how much you rely on them and if they continue to add value to your projects.” ~ Salvador Ordorica, The Spanish Group LLC

8. Innovation

“When determining whether or not to reward an employee with a pay raise, consider how they’ve brought new, fresh ideas to the table to move your business forward. Those who create unique ideas will help you rise against your competitors and create content and campaigns that speak to your audience so you can boost conversions.” ~ Stephanie Wells, Formidable Forms

9. Key Performance Indicators

“I look at our KPI reports when determining how much an employee will get for their annual raise. If they exceeded our expectations, they would get a substantially higher bonus when compared to someone who does the bare minimum. This strategy encourages our team to do their best and to take responsibility for their quarterly goals.” ~ John Brackett, Smash Balloon LLC

10. Amount of Responsibility

“I like to give raises to team members who take on extra responsibility or show interest in other projects. Since we are a small business, responsibilities can expand or change quickly, so I appreciate it when someone does take on new or extra tasks. When they do, I compensate them accordingly.” ~ Kristin Kimberly Marquet, Marquet Media, LLC

11. Delivered Value

“Focus on value delivered. There’s often a clear line of contribution to a company’s bottom line that can be attributed to each employee. Assess output on a monthly basis. If there’s an alignment, then consider offering a pay increase to the employee during their next review.” ~ Tyler Quiel, Giggster

12. Potential Growth

“I want to see if they can envision growth for themselves in the company. I initiate a conversation and return to that classic interview question: ‘Describe your future with this company.’ If it’s clear, enthusiastic and realistic, then proceed with the raise. Reward loyalty and drive toward retaining institutional knowledge.” ~ Tyler Bray, TK Trailer Parts

13. Level of Investment

“Employees who are invested in the business often come up with ideas to improve workflows and customer experience. Such employees are going above and beyond their tasks and make a real difference to the company. Contributions toward improving the company overall are critical factors to consider when offering a raise. You want to keep such employees on and reward them too.” ~ Syed Balkhi, WPBeginner

Image: Depositphotos

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.