Was My Raise Too Small?

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Q: I just had my performance review about a week ago, and I was rewarded with a pay increase of 4.75 percent, which seems minimal at best. According to my calculations, this increase does not even cover the cost of living. Is it a common practice for large companies to “reward” employees with such a negligible raise? If not, how could I learn what the median raise is for companies in my area?

A: Most companies have a merit budget that dictates the amount of money they give employees when it comes time to deliver annual merit increases. The average merit increase in 2000 hovered around 4 percent. Over the same period, the fully loaded cost of living rose 3.7 percent. So your 4.75 percent raise is actually an above-average merit increase and a real increase of more than 1 percent. While a 4.75 percent increase may seem “negligible” to you, it may be all your company can afford to give you – and it still beats the market.

Still, you may want to ask your manager what the average merit increase is for your company. Then ask what you have to do next year to get an increase greater than 4.75 percent.

Good luck.