By Ryan Velez
Chances are you’ve probably heard of the concept of a cost-of-living increase. Prices of things do go up, and a long-time employee may need an increase in salary to maintain a standard of living for them and their family. Of course, handing out these increases not only incurs more cost for the employer, but can incur some discord if one employee gets it and another doesn’t. So, with this potential, are cost of living increases worth it? A new article from The Network Journal tackles this question.
Nicole Munoz, of Start Ranking Now recognizes that when it comes to incentives, money is one of the most powerful you can provide. “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.” While no one wants an employee who is solely working for the paycheck, financial rewards are instantly applicable to any employee, so it makes sense that one would take this route.
However, when we talk about the cost of living, we have to note that it’s not always going to be the same wherever you go. As a result, when thinking about increases, if you have a team that is spread out, take this into account. Rob Fulton of AudioLumin shares how he has “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’s fair and what I can afford.” Customizing bonus for each employee ensures both fairness and you not overstepping your means.
However, the needs of your employees are not the only things that will guide your hand when it comes to handing out bonuses. The market itself plays a big role. One of the best things you can do is regularly look at rates for the various positions your employees hold. Bhavin Parikh of Magoosh Inc., says that if he notes that rates are increasing in a position, he will give a general increase to everyone in that area. This makes sure that long-time employees don’t get out-earned by newcomers simply because they came in during a hot time. Ultimately, while you want to be well versed on outside factors when it comes to raises, at the end of the day, performance should be a deciding factor.