An article was published last week with data from Aon Hewitt and Towers Watson that showed the annual pay raise is essentially dead (and in Towers Watson’s case, bonus pools will also be underfunded). The data apparently shows that we will deliver base pay as a flat amount going forward. Increases in pay will come from incentive plans, if they are funded. Let’s cast a fond farewell to a method of pay that has existed for as long as people have been paid. Thankfully, we live in America the land of the free and the home of zombies, werewolves, vampires and tons of other things that come back from the dead! On top of that, Halloween is in just a couple weeks, so we can depend on being frightened and then fed something sweet.

In a world of no raises, creating a competitive pay program should be insanely easy. All you have to do is start giving people raises. Don’t follow the data. Follow your brain. We are not zombies who must blindly follow each other.

Don’t make pay increases something that only occur on the occasional full moon. Create a program that does for your employees what should be done. Have a pay philosophy that drives your unique value proposition instead of one that is driven by the uninspiring greyness of “everyone does it.”

Don’t charm your recruits and employees with fantastical stories then drain them of their life force when they sign on. Use everyone else’s lack of imagination and foresight to your advantage. Give raises when others don’t and crow about it from the top if the nearest tree silhouetted in the moonlight.

Unfortunately, we live in a country where many people will read about the death of annual raises then decide to make it come true. Heck, we have multiple ghost and Bigfoot hunter television shows!  Many will believe almost anything. Don't be fooled.

Too often we, or our executive bosses, jump on data like this as a way to justify limiting pay even when productivity or achievements are growing. You should instead use the “middle’s” lack of imagination or motivation as your competitive advantage. Apparently over the next year or two all you need to do is give your people basic raises to crush the competition. Imagine if you gave reasonable (or even good) raises and did ALL of the things that you know are important (communicate, motivate, manage, etc.) It looks like you may end up being unstoppable while attracting and retaining the people you really want.

Of course, there is always the possibility that the predictions made from the data are simply wrong and you should continue to follow your own philosophy and structure. What do you think?  Are annual raises dead or is the data dead wrong?

Dan Walter is the President and CEO of Performensation and is committed to aligning pay with company strategy and culture. Grab a copy of Dan’s new comprehensive issue brief,Performance-Base Equity Compensation. Dan has also contributed to “Everything You Do in COMPENSATION IS COMMUNICATION”, with Comp Café writers, Ann Bares and Margaret O’Hanlon. And if you’re still not sick of Dan, he has co-authored “The Decision Makers Guide to Equity Compensation”and “Equity Alternatives.” Connect with Dan on LinkedIn. Or, follow him on Twitter at @Performensation and @SayOnPay.

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