While some entrepreneurs adjust salary depending on the city, others think raises are best saved for performance. The factors used when deciding to increase salary vary. The necessity to keep things fair and balanced is not just a concept meant for the employee but also to the executive team. Three good things to keep in mind when debating a raise in pay are is it fair to the rest of your team, is it near market rate and is it fair to you.
We asked nine entrepreneurs what they thought the most important thing to mull over was when considering a cost of living increase. Check out the answers below and make sure your employees, or your employers, are happy:
Money Is a Powerful Incentive
Of course, I want my team to have more perks than just a good paycheck. I strive to hire people who love their work and value enjoying what they do more than money, since passion has a longer shelf-life in job satisfaction. However, if an employee takes on more responsibility, they are rewarded with more money. Likewise, opportunities for additional project work are generally available as well.
– Nicole Munoz of Start Ranking Now
Customize Bonuses for Each Team Member
Most of my team members live in different cities: I have a copywriter in California, a programmer in Romania and a designer in Colorado. Each of their cost of living is vastly different. I take this into mind when I set up their base salaries, but then as I want to reward them with bonuses and promotions, I research what is fair and what I can afford.
– Rob Fulton of the Rob Fulton Accelerator
Focus on Market Rates
Rather than providing employees with a strict cost of living increase, we regularly research market rates in our area for each position. If the market rates are increasing for a giving position (e.g. engineering), we'll increase the pay for everyone in that area. This ensures that new employees don't get paid more than existing employees when the market is hot.
– Bhavin Parikh of Magoosh
Give Regular Raises
I believe that you should give employees regular raises if they are learning and becoming more profitable or beneficial to the company. This raise should be more than enough to compensate cost of living expenses, and more importantly, the cost of keeping them happy and as long-term employees.
– Peter Daisyme of Hostt
Negotiate on an Ad Hoc Basis
Our 100 percent remote team is based around the world, and they're free to change their location as needed. We don't have an official policy on cost of living increases if they change their location, but we've made it clear to them that they can talk to us about anything they need to. At the same time, everyone knows that we're bootstrapped, so we're not going to be able to pay them huge sums of money.
– Dave Nevogt of Hubstaff
Focus More on Performance-Based Bonuses
Instead of zeroing in on specific ways that our employees spend their money, we prefer to make performance-based bonuses available to them. As much as we can, we reward employees for their efforts and for just being a great part of our team. This gives incentive to work hard but also pays where credit is due.
– Miles Jennings of Recruiter
Support a Happy Home Life
If one of our employees has been on the team long enough to warrant a periodic raise, I feel it can only add value to our company as a whole. Having a happier life at home allows people to come into work with a clear mind, keeping them focused throughout the day and free of worries about life outside the office.
– Phil Laboon of eyeflow
Take It Into Consideration, but Don't Let It Be the Only Factor
Salaries should be adjusted at the beginning of an employee's work relationship to reflect their cost of living at a comfortable standard. After that, salaries can be adjusted to reflect changing cost of living, but it's not fair to only bump up an employee's salary a few percentage points and say you're done just because you gave them a small increase. A real raise is based on performance.
– Jared Brown of Talentopoly
Increases Are Earned, Not Handed Out
We are all about giving credit where it's due. If an employee performs for the company, we will motivate and compensate for that. Rewarding without some level of performance hurts the company in the long term and sets a bad precedent for the employee.
– Hesam Meshkat of Guzu