Calculating a raise can be a tricky task. Many managers struggle with it across various industries. As a result, lots of professionals get inadequate raises for their performance each year. This can have numerous negative side effects on the growth trajectory of businesses.
Fortunately, using the correct approach can make it simple to calculate a raise. In this article, we’ll dive deep into the topic of raises and explore its key details, starting with the basics. We’ll also look at how a time tracker can help you calculate raises accurately and reward your best performers.
Understanding the basics of a raise
As you may know, a raise is simply an increase in a professional’s salary. One thing you may not be familiar with is the two main types of pay raises: flat raises and percentage-based raises.
Flat vs percentage-based raises
The two main raise types differ mainly by how you need to calculate them. A flat raise simply adds a set amount to an existing wage. A percentage-based raise, meanwhile, calculates the added amount based on an existing salary. As a result, percentage-based raises may be more flexible for varying salaries. Flat raises, on the other hand, generally can’t be applied across an entire team or company.
Whichever type you choose to go with at your firm, they will both have the same effect: increasing job satisfaction. This is closely tied to employee engagement, which is a vital metric for ensuring business growth in the long run.
Key factors to consider when calculating a raise
When calculating a raise, you need to consider a few factors to reward your team members appropriately. Let’s explore these now, starting with arguably the most important one, employee performance.
Employee performance
Assessing the performance of your team members is the most important part of calculating a raise. After all, you should reward your best performers more than the rest of your staff. It’s important to use key employee productivity metrics in this process, such as sales numbers or project completion rates. This way, you can effectively reward hard work and dedication in your team.
Market research
Conducting market research is another important step in calculating a raise. If you skip this step, you could offer subpar raises to your professionals, leading to dissatisfaction. On the flip side, it is also possible for you to offer an increase that is too good. While your staff will appreciate it greatly, such high raises have one problem: sustainability. You won’t be able to offer such raises repeatedly, as they can impact your company’s finances. Generally, you should calculate raises to be slightly better than your industry’s average.
Company performance
While you may not think about company performance much, it can play an important role in calculating a raise. If your business is not performing well, you may not be able to offer significant raises without risking major harm to your firm. On the other hand, if your company is breaking records, your raises should reflect that as well. This is especially important if your business’s performance is visible to your employees. In these cases, a low salary increase can lead to high turnover rates and subpar professional engagement.
How to use a time tracker to calculate a raise?
Data plays a major role when calculating a raise at your business. This is where a time tracker can be quite useful.
Monitoring productivity and performance over time
While the main functionality of a time tracker is monitoring work hours, high-quality ones can do much more. A time tracker like WebWork can enable you to track your team’s performance over the long run. It tracks employee performance with features like productivity and activity level monitoring. You can then view your team’s data in detailed reports. This can help you assess both the quality and quantity of work done by your staff. As a result, you’ll be able to identify your company’s top performers effortlessly.
Calculate total work hours and overtime
Calculating the total work hours of employees can be another important piece of information for a raise. While it may not be very useful on its own, it can be powerful when combined with productivity monitoring data. It can assist you in determining which of your employees put extra effort into their work. For example, employees who stay longer at work are generally dedicated to their roles. You must reward this commitment adequately to maintain it.
Communicating raise decisions with employees
Even if you spend a lot of time calculating a raise, some professionals may simply be difficult to please. Because of this, communication is key. Let’s explore how you can make sure everyone is happy when calculating raises.
Be transparent about data
Transparency is a key factor in communication. When calculating a raise, it plays an important role in ensuring employee satisfaction. You should always show what data you used in your calculations. If you used a time tracker for collecting the data, consider exporting and compiling it into reports. High-quality time trackers like WebWork do it for you, making it easy to offer a great level of transparency.
If you ever decide to deny a raise request, you should always state the reason. Most companies are bad at communicating this clearly, which leads to high turnover.
Be open to feedback
Even when you ensure a high degree of transparency, some people can still have concerns. You should be open to changing your raise calculation policies if there are a lot of complaints at your business. Determining the cause of these concerns can help improve your company’s practices in the future.
Highlight what to look forward to
When a team member isn’t fully satisfied with their raise, you should highlight what they should look forward to. If your business offers periodic salary reviews, highlight this each time you calculate a raise. When offered relatively frequently, like every six months, this can enable you to offer slightly lower raises each time.
Closing thoughts
Calculating a raise can be a tricky process. It requires lots of considerations, including in terms of employee performance and company financials. But, using the right tools and techniques can make the process simple. You can use a high-quality time tracker to make it easy to reward the best performers at your firm. This will lead to satisfied employees who will also perform better in the future.
