Pros And Cons Of Annual Pay Raise

Weekly Case for Analysis
Leaders of big companies are debating whether or not to cease giving out annual pay raises to its hourly personnel. Some companies are debating annual raises in favor of incentive based pay raises. The basis for this is, and has always been, is money savings for the company. As companies lose money from sales, efforts have to be made to trim the proverbial fat around the company. This tactic has many pros and cons. This paper intends to hash out some of those pros and cons and attempt to make a decision on which practice is the best. Annual pay raise versus incentive and rewards based pay raises.
The first question we need to ask is, why refrain from giving annual pay raises to employees as it has been done for many …show more content…
Different companies are taking action to come up with ways to ideally save money. By the way, this has got to be what it all boils down to. The articles talk of how it is about keeping up with morale issues and motivating employees, but we all are aware that it has everything to do with saving the company money. “Employers increasingly are turning to variable pay, such as spot bonuses, which don’t permanently raise an employee’s salary and give companies more flexibility in down times”.(Silverman, 2016) It is hard for me to believe that employers are worried about morale and motivation issues when statement like the previous are made. However, it is one option that companies can use. This “spot bonus” idea gives the company the opportunity to give bonuses when sales are good and stop giving them when they have had a bad sales quarter. It seems to me that this would be very advantageous for the business. It would depend on the size of the bonuses as to how valuable they are for the employee. This method also saves the company money as a standard raise would be a commitment to pay someone for the rest of their time at the company. This includes benefits and a possible disability claim that may arise in the …show more content…
Perhaps there could be a reward for perfect attendance. In a company that employs one thousand people, I would venture to say that only about one hundred of them, if that, would make it to work every single day, never being late. This would exclude any vacation that was earned and may have been taken. A person who shows up to work every day and puts in a hard day’s work should be rewarded for their actions in my opinion. It is not an impossible task and the reward could be comparable to the employee of the year award. When people see that their hard work will be rewarded, they will be more motivated to show up and work hard every day. Another incentive based program could be that anyone who has introduced a way to drastically improve production goals could be rewarded with a percentage of the increase in sales as a result of their findings. For instance, if a worker finds a way to carve out two or three minutes day by eliminating an unneeded procedure or even adds a procedure that increases production, a bonus could be given for a percentage of the profit for the company. This could be a tremendous bonus depending on the situation. At the same time, it would keep employees minds always on continuous improvement. Overall, this will increase sales and get them a healthy bonus at the same time. It is a win, win situation for