Reply to the students’ response and not the question in 150 words minimum and provide 1 reference. Respond to the students response as though you are talking to them, use name

question
In consideration of merit increase amounts and equity theory, from an employee perspective – how important is the perceived percentage to an employee regarding his/her increase? Why?
From an employer perspective, how do you manage expectations and equity around merit and equity? What are some factors to consider to keep high-level performers engaged.
students answer

In consideration of merit increase amounts and equity theory, from an employee perspective – how important is the perceived percentage to an employee regarding his/her increase? Why?

Merit pay programs are designed for the employee’s pay increases in compensation to be determined by their job performance. Martocchio (2020) states that “for the pay increase to be considered meaningful, the employee must see the size of the increase as substantive in a relative sense as well as in an absolute sense” (p. 190). Equity theory suggests that employees must perceive the percentage increase similar to the ratio for other comparably performing people in the company which means that the best performers should be receiving the largest merit increases (Martocchio, 2020, p. 190). The employee wants to see that their percentage is equal to the performance conducted. This is important so the employee is perceiving they are being rewarded appropriately based on their performance.

From an employer perspective, how do you manage expectations and equity around merit and equity? What are some factors to consider to keep high-level performers engaged.

Employers can manage expectations regarding merit and equity by utilizing compensation budgets to see how much money they have in the budget for employee increases which will help them to develop a system to motivate employees. Since the company only has so much money to reward the employees with, the top performers should be the ones to receive the merit pay increases through linking job with performance. Employers needs to take into account the cost-of-living increases when increasing an employee’s salary with a merit pay raise so the employee sees it as a meaningful pay increase. Some factors to keep high-level performers engaged can be for managers not to wait 12 months for an employee review to discuss merit pay increase, providing smaller but more-frequent salary increases or offer a lump-sum bonus that would be equal to a salary increase (Sammer, 2020). Sammer (2020) also suggests that managers should “engage in preparatory communications well before compensation discussions and performance reviews begin.”

References:

Martocchio, J. (2020). Strategic Compensation: A human resource management approach (10th ed.). Boston: Pearson Education.

Sammer, J. (2020). Reward Top Performers Even in Lean Times. Retrieved 22 January 2020, from https://www.shrm.org/hr-today/news/hr-magazine/pages/0914-rewards-performance-based-pay.aspx

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