Why Frequent Merit Increases Are Key to Retaining Top Talent
Most organizations still run merit increases once a year, often timed with either an employee’s work anniversary or year-end performance reviews. While this approach worked fine in the era of Excel spreadsheets, modern compensation tools have removed the barriers to more frequent merit increases. With technology making it easier, it’s time to reconsider whether annual merit increases are holding you back.
The Problem with Annual Merit Increases
Annual merit increases were designed to streamline compensation processes at a time when manual work made frequent adjustments difficult. Organizations shifted to synchronized review dates to simplify budgeting and maintain consistency.
But in today’s competitive job market, waiting an entire year to adjust salaries could be putting your best talent at risk. Top performers want regular feedback and rewards. If you aren’t keeping up, they’ll find an employer who will.
Is your organization still stuck using spreadsheets? Modern tools like SimplyMerit simplify merit increases, making frequent reviews both feasible and beneficial.
The Case for Quarterly or Trimester Merit Increases
With modern tools, nothing is stopping organizations from adopting quarterly or trimester-based merit increases. Here’s why this shift makes sense:
1. Stay Ahead of Employee Dissatisfaction
More frequent reviews help you catch dissatisfaction early, giving you time to address issues before they escalate into resignations. Trimester reviews work well for global organizations or those transitioning away from annual cycles.
For fast-growing companies, quarterly reviews provide regular checkpoints to evaluate performance, engagement, and ROI from your workforce. They help align business objectives with employee goals and retention strategies.
2. Employees are motivated to perform at a higher level.
When employees are confident they can have consistent, direct, honest conversations with their managers about pay and performance, they feel appreciated (or at least heard). If they trust the company and are still receiving value from the work they’re doing, they’ll work harder to achieve the goals set forth in each point of contact.
3. Managers are empowered to make wiser decisions with their budgets.
More merit increase conversations over the course of the year give managers reason to monitor their budgets more frequently. (And with tools like SimplyMerit, they can get real-time visibility into compensation and budgets at the click of a button!)
4. Salaries can be normalized.
Running three or four merit increases a year allows comp teams to piece out increases over time. With more frequent communication, managers can set the expectation with employees that pay gaps can’t necessarily be fixed all at once, but they can be addressed over time.
Start running merit increases more frequently and see the results.
In the current job market, employees can get data from everywhere and make their minds up about whether or not they’re getting paid fairly for their performance without having a single conversation with their manager. More frequent merit increase conversations keep that from happening, allowing managers the chance to honestly, proactively, have conversations about pay.
And with tools that gather the salary and compensation data you need to facilitate these conversations, it’s a simplified task that leads to meaningful, thoughtful rewarding of employees for their performance.
