Companies Rethink the Annual Pay Raise

Dana Wilkie

No more annual pay raises? It’s a move that companies increasingly are considering, most recently General Electric (GE).

And if this becomes common, the change could either redefine rewards systems in a way that motivates employees and attracts high-quality candidates—or it could prove to be a demoralizing switch that leaves many workers’ wages lagging behind the cost of living.

“This is the future and it has only just begun,” said Jason Averbook, a 20-year HR veteran and former CEO of TMBC, a global provider of engagement and performance solutions based in Los Angeles.

Kris Duggan, CEO at BetterWorks, an information technology and services provider in the San Francisco Bay Area, called the idea “revolutionary.”

At BetterWorks, he said, “we’re looking at salaries every couple of months to make sure we’re paying fairly. An annual [raise] is an old-school way of thinking based on the assumption that employees plan to stick around for five to 10 years. If you wait an entire year [to review compensation], you might lose employees who don’t want to wait for a [raise]. If we hire an engineer at a certain price point, we evaluate how much we’re paying our other engineers to be sure we’re always paying fairly.”

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