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Let's distinguish between salary budget increases and salary structure adjustments.



Salary budget increases (prior page) reflect annual increase in wages plus the attainment of skills, competencies and experience, as well as employee performance.
A salary structure embodies an organization's pay policy, i.e., how competitively it wants to pay versus its labor market. This policy is typically depicted in an organization's compensation philosophy. Salary structure adjustments (this page) help keep the salary structure competitive with the external labor market, especially in the years between comprehensive market studies (market pricing). Periodic updates of salary ranges protect an organization's ability to compete in the market place for talented employees.
Most organizations move their salary structure (pay ranges for established grades or bands) annually, as budget permits.

World at Work points out that the salary budget increase and "the salary structure adjustment have wholly different purposes, and while there commonly appears to be a relationship between the two—both rising over time with the salary budget increase generally exceeding the salary structure adjustment—there is not necessarily a [causal relationship]." [Source: World at Work White Paper "Salary Structure Change and Compensation Increase Budgets," January 2011.]

For the US, the actual structure adjustment in 2016 was 2.0%. The projected salary structure increase for 2017 is flat at 2.0% again.

Historically, the projected salary structure increases are between two-thirds and three-fourths of the projected salary increases. Following this pattern, structure adjustments for 2017 are about 67% of projected salary increases. Most organizations move their salary structures less aggressively or less frequently than their salary increase budgets so that employees' salaries move into their respective salary ranges. If both moved at the same pace, some employees' salaries would languish at minimum indefinitely.


Salary Structure Increases

2014 2015 2016
United States 1.5% 1.7% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Eastern US (incl. DC, MD, PA) 1.5% 1.7% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Southeastern US (inc. VA) 1.5% 1.4% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%

Using the Salary Structure Increases

If your salary structure was designed by Clear Management, you can update the entire pay scale (Minimums, Midpoints, Maximums for each grade) by entering the appropriate salary structure adjustment from the table above into the highlighted cell. For example, to add 2% to the salary structure for next fiscal year, edit the existing formula in the Pay Scale Increase cell by adding "*1.02" to the end of the formula and press Enter. All cells will automatically recalculate.

If your pay scale was not designed with an automatic recalculation feature, follow these steps to adjust each range in your salary structure.

Calculate the new grade midpoint by multiplying one plus the desired salary structure adjustment percentage times the current midpoint.
Calculate the new minimum by multiplying the grade midpoint by the minimum factor. Note: If you do not know the minimum factor for your plan design, you can calculate it by dividing the current minimum by the current midpoint (often .75 or .80, depending on your specific compensation plan design).
Calculate the new maximum by multiplying the grade midpoint by the maximum factor. Note: If you do not know the maximum factor for your plan design, you can calculate it by dividing the current maximum by the current midpoint (often 1.20 or 1.25, depending on your specific compensation plan design).
If your organization's salary ranges are rounded to the nearest hundred or thousand, round the answers appropriately.
If there are any employees whose salaries fall below the new minimums for their respective ranges, their salaries should be increased to the new minimums, provided that performance is at least satisfactory.

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