When you communicate a merit increase to an employee, they will typically listen to the percentage increase. Then they will compare that to the merit budget percentage. That tells them whether they are better than “average” or not. It doesn’t matter what performance rating you gave them.

Example 1: “The merit budget was 3%, but my manager gave me a 2.8% increase. I must not be meeting expectations like I was rated. This doesn’t feel good. I should have had a 3% increase or more if I was meeting expectations.”

Example 2: “The merit budget was 3%, and my manager gave me a 3.2% increase. That is good. That is aligned to the meets expectations rating they gave me.”

Example 3: “The merit budget was 3%, and my manager gave me a 3.2% increase. That isn’t good. I was given an exceeds expectations rating and was hoping for at least 3.5%. I wonder why I got less. This doesn’t feel good.”

Consider focusing your pay conversation on the amount of the increase instead of the percentage change. That way the employee will think about how to spend that additional money instead of comparing it to the budget.

Example 1: “I received a $3,000 annual pay increase. That will help me pay my bills and cover the cost of my rent increase.”

Example 2: “I received a $1,800 annual pay increase. That is more than $100 a month. That helps with the cost of groceries.”

Of course, the employee can calculate the percentage pay increase when you share the dollar amount. But this shift to focusing on the amount of the pay change causes the immediate reaction to be about how the additional money will impact their lives.

Subtle changes in the way you communicate about pay can cause a change in your employees’ satisfaction with their pay.

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Source: C3 Group