Just-meaningful differences in merit increases

1. In consideration of merit increase amounts and equity theory, from an employee perspective – how important is the perceived percentage to an employee regarding his/her increase? Why?
2. From an employer perspective, how do you manage expectations and equity around merit and equity? What are some factors to consider to keep high-level performers engaged.

students answer

“Employees’ perceptions of just-meaningful differences in merit increases depend on their cost of living, their attitudes towards the job, and their expectations of rewards from the job; also the employee must see the size of the increase as substantive in a relative sense as well as in an absolute sense (Martocchio 2017 p.180)”. From an employer perspective, some ways to manage expectations and equity would be to reward employees that have the highest performance ratings with the largest merit increases and reward the employees with the lowest performance ratings with the smallest increases. Managers interested in establishing a merit pay system must determine merit increase amounts , timing, and the type of merit pay increase. They must also settle on base-pay levels relative to the base pay of functionally similar jobs (Martocchio 2017 p.179).”

Reference:

Martocchio, J. J. (2017). Strategic Compensation: A Human Resource Management Approach. New Jersey: Pearson.