All in Culture

Triennial merit pay increases are the latest trend in compensation. This exciting new approach to base pay is something to consider before your next round of raises. Once every three years.

I have listed five reasons to consider triennial increases and am sure you can add to this list. I am also sure that naysayers will point out potential problems, but we optimists can chat about those some other time.

I was speaking to the Head of HR at a small, talent-intensive company. We were discussing the cost of long-term incentives as related to their compensation philosophy of paying between the 50th and 75th percentile. Adding equity effectively and economically is always a challenge.

At the companies who eschew variable pay altogether, the problem can be worse. Many of these companies pay base above the median. Over the year, the compounding growth in base pay outpaces the market, their needs, and the companies’ budget. High base pay can be a great approach, but it must be managed and explicitly communicated. Errors in this philosophy can be hard to correct.

We have been living in an age of 3% annual increases for several years.  Sometimes it’s a bit more; sometimes it’s a bit less. On average, it’s not too inspiring. We do our best to give a bit more to our best performers, but those in the middle must fend for themselves. It’s not hard for them to find a time machine.

Hiring a great salesperson is the key to success for many high-growth companies. The Rainmaker, high-earner, big kahuna or closer can change the growth directory for any company, large or small. These great revenues generators do not come cheap. In fact, they may often make more money than anyone else in the company. They may be worth it.