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Raises and Bonuses
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  Raises and Bonuses: Will You be Rewarded for Performance This Year?
Raises and Bonuses: Will You be Rewarded for Performance This Year?
Assuming that you and your company have achieved target goals...you can expect a raise between 3.3% and 4.1%.
 

Well, it's March 2005, and if your employer is on a fiscal year that coincides with the calendar (many do), you will most likely be receiving some sort of annual performance review. And with that annual review, you most likely are hoping to receive a base salary increase for 2005 and a bonus/incentive payout for your 2004 performance. The following information illustrates typical base salary increases and bonus/annual incentive target payouts.

Base Salary Increases

Most companies will award a base salary increase that is dependent on several factors, including job classification, your individual performance, your company's overall financial performance, and your company's salary structure. Assuming that you and your company have achieved target goals, and that you are relatively close to the midpoint of your salary structure grade, you can expect a raise between 3.3% and 4.1%. Specifically, typical salary increases for 2005 are as follows:

Job Category
Expected Typical 2005 Salary Increase Rates
Executives
3.6% - 4.1%
Exempt Employees
3.4% - 3.7%
Non-Exempt Employees
3.3% - 3.7%
Source: Salary.com March 2005


Bonus & Annual Incentive Payouts*

Bonuses and annual incentive payouts depend primarily on two variables: your job performance and your company's overall financial performance. Depending on your job, these programs can vary in complexity and payout. For example, if you are a customer service representative in a call center, your bonus might depend only on the volume of calls that you handled throughout the year. For this type of job, your company's financial performance might have little or no impact on your bonus/annual incentive payout.

Alternatively, if, for example, you are a marketing manager, your bonus payout might depend on not only your performance, but also the performance of your product, your product line, your department, your division, and your company as a whole.

Click on the links below to see the typical base salaries and bonuses for these jobs (and try your own job too):

- Customer Service Representative base salary

- Customer Service Representative including bonus

- Marketing Manager base salary

- Marketing Manager including bonus

Notice that, at the median, the customer service representative receives a 2.2% bonus, while the marketing manager gets an 8.7% bonus. Whatever your job title is, the main premise of a bonus annual incentive is that the payout is determined based on some type of performance. The common phrase for this with today's human resource professionals is "pay for performance."

As previously discussed, depending on your job and certain performance factors, your company might award a bonus/annual incentive payout. In many situations, companies will model and set payouts based on target amounts and desired employee performance. Assuming that your performance meets target standards, the following table illustrates typical bonus/annual incentive payouts (depending on your job category and base salary earnings range) for 2004 performance.

Job Category & Associated Base Salary Earnings Range
Typical Target Bonus/Annual Incentive Payouts (as a % of Base Salary)**
Top Management
$1,000,000 or more
100% - 200%
$500,000 to $999,999
50% - 200%
$200,000 to $499,999
25% - 100%
$125,000 to $199,999
20% - 25%
$100,000 to $124,999
15% - 20%
Less than $100,000
10% - 15%
Middle Management
$100,000 or more
15% - 25%
$75,000 to $99,999
10% - 15%
$50,000 to $74,999
5% - 15%
Less than $50,000
5% - 10%
Supervisory Management
$60,000 or more
5% - 10%
$30,000 to $59,999
2% - 7%
Less than $30,000
0% - 5%
Professional Jobs
$60,000 or more
5% - 10%
$30,000 to $59,999
2% - 7%
Less than $30,000
0% - 5%
Technical & Skilled Jobs
$45,000 or more
5% - 8%
$35,000 to $44,999
3% - 6%
$25,000 to $34,999
2% - 5%
Less than $25,000
0% - 3%
Source: Salary.com Feb 2005

* Bonuses and annual incentives are generally mentioned together and are considered "pay for performance" vehicles. The main difference between the two terms is that bonuses are typically paid "after the fact" and are more discretionary in nature. Annual incentives are paid based on pre-defined performance criteria.

** Data is representative of companies in all industries, all company sizes, all geographic areas. Not all companies have annual incentive plans and even among those that do, not all employees are always eligible. For those who are eligible, if you did a good job and your employer did well, this is what you might expect.


-By Keith Fortier, CCP, Director of Compensation, Salary.com

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