Bloomberg Case in the News Say Goodbye to the Annual Pay Raise no or in a given
ID: 325369 • Letter: B
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Bloomberg Case in the News Say Goodbye to the Annual Pay Raise no or in a given year And th able to directy see the the between ther cason of how we" someone did tho Job over a fut year Managers don'treward for that mor, leaving "or year long. and they admit to rating to really make amthe you're getting this bonns se dos either of remember how people performed all Esen. "t gives those things very wel with the sub-par workers the same as stand-.to their top performer ment year gives them no chance to respond compensation harder to cut drec out employees. Workers also complain well and clety that hearing about their flaws once a not to give people ralises, and itsg Many companies, including Adobe PLC, and for Human Resource Manage and change employers can give bonuses . a company has a bad year y is decent, annual centage point or 2 percentage points Systems Inc. ahead of iniation for a given year. That Gap Inc, have abandoned ew for have to give out bonuses. On doesnt go foc Employees expect to the annual performance get at least the cost of living adjust those exact reason ani more granular level, an has a bad year might not get a that year, either Comp ment, and a measly 2 percent increase zations have ongoing review pro in pay doesnt do much to encourage cesses that, in theory, more accurately or change employee behavlor At best. reflect someone's output on the job. them as sticks or carrots, as The bonus is just one version gf the most ing a 5 percent raise, only slightlyso should raises. "If we have perfor the changing nature of stellar employees are get- As reviews become more frequent mance reviews all the time, we're nottion. Whatever happens to the panies give everyone raises on the away from this old-school an annual compensation survey by really values that increase that more than their average colleagues, who in 2016 can expect a 31 percent going to have annual increases, said will become more granular and bump-if hat. In the end, it's too smallEsen As of now, 90 percent of com lar Companies are trying to an increase to make a difference Historicaly, the best way to receive same day, once a year, according to annual increase: said Esen. "N a significant raise is to either get a promotion or jump to a new com- compensation survey because it's usually not that high Mercer That is already changing pany. With the job market tighten-GE Company. which recently Greenteld, Rebecca, "Say Goodbye to ing for certain white colar workers in moved away from the annual review Souroe competitive and growing industries, is considering scrapping annual com Used with the Arnual Pay Raise, Bloomberg, June 21 companies have started rethinking pensation hikes. "We uncovered an2016. All rights reserved permission of Bloomberg. Copyrigs compensation packages to keep peo opportunity to improve the way we in a perks and benefits arms race but Janice Semper, GE's head of execu- in new ways of thinking about pay tive development, told Bloomberg. increases The yearly ritual of doling GE declined to elaborate on what its out incremental and somewhat disap new system might look like, but Sem- pointing salary increases is quietly dis- per cited the vague goals of "being sppearing. The conventional process flexible and rethinking how we define s heed of execu 1. From a managerial perspect what are some potential disadvantages of ongoing informal performance reviews of giving an annual increase is being rewards 2. From an employee viewpoint, co studlied, reviewed-under siege, you ther organizations are achieving might say." said Steve Gross, a senior such flexibility via bonuses. Variable partner at human resources consulting pay has become an increasingly large you think replacing small annual increases with bonuses based performance is equitable? Why o part of pay packages, making up a schedule record 12.7 percent of compensation, is too infrequent to change some according to an Aon Hewitt survey one's work ethic. In theory. money from last year. It's a much more effec signals how good (or not) someone tive way to tell people they did a good is at their job. But, it's impossible to job. "With bonuses, you're specifically 3. What can managers do to prepare their employees for a shift away from annual reviews and annual salary increases?Explanation / Answer
2. Yes, I believe that replacing the annual raise by bonus is actually a good option as an employee because of various reasons and the most important of them is that the annual raise that the employees receive is something not sufficient because after a year long rigorous work and performance getting an annual hike that range from 6% to 12% does not seem fair for the employees and this hike rate is almost standardized by all the organizations and depending upon the performance of the organization during the whole year, the rate is decided. I believe that instead of this annual process if there is performance bonus for the employees quarterly or on a different time period, then that will actually be better because employees will get the raise early and the bonus will help them stay motivated. An employee waits for the whole year and then receives a hike percentage which actually demotivates the employee and their urge to perform but the bonus will help them gain motivation and do better so that the next time the bonus is even higher than what they receive today. Most of the organizations feel that this annual process is obsolete and have removed the system and implemented bonus that is paid quarterly or half yearly in order to be fair with the efforts of the employees that they put for the organization.