Typical Salary Increase Differentiation Based on Performance

Another interesting tidbit of information from the recently released study "2006/2007 Strategic Rewards Report: Aligning Rewards with the Changing Employment Deal" published jointly by Watson Wyatt Worldwide and WorldatWork (and featured on yesterday's post about why top performers leave organizations): the typical differentiation in salary increases for low and high performers at responding companies.  According to the report:

The typical salary increase for low performers (employees who only partially met expectations) is 1.5%

The typical salary increase for high performers (employees who far exceeded expectations) is 5.0%

As a baseline, the study reports an anticipated average merit increase of 3.6% for 2006 (essentially in line with most salary budget research). 

So, based on this data, there appears to be (very roughly) about a 50% swing in either direction from the "normal" or budgeted level of increase for the lowest and highest performers.  And top performers, on average, earn a salary increase more than 3 times that of the lowest performers.

Just thought these were some interesting "norms" to consider for those of us out in the world creating salary increase policies and practices.

Comments

[Frank Giancola]

Relating the high potentials' main reason for leaving---more money---to the differential between a high performance and average merit increases---1.5% or $750/per for a salary of $50K---it is understandable why they are leaving for more money: They are not getting enough of an increase for contributing more for high performance. Employers would seem to have a good rationale for giving more, eg, 10%.