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Salary Increase by Percentages

Develop a plan for the distribution of salary increases. Suppose you are employed in a local industry, and your supervisor has assigned you to distribute annual raises that must average 4% per department among 6 team members. No team member can get exactly 4%, and the raise must be at least 2% and no more than 6%.

You may establish your own criteria for distributing the raises, but you are given the years of experience and the rating on annual performance reviews for each member. A performance rating of 1 is the lowest rating possible and a rating of 5 is the highest.

Employee 1 has 4 years' experience, a performance rating of 4, and a salary of $28,500.
Employee 2 has 3 years' experience, a performance rating of 4, and a salary of $28,500.
Employee 3 has 10 years' experience, a performance rating of 4, and a salary of $32,700.
Employee 4 has 7 years' experience, a performance rating of 3, and a salary of $31,400.
Employee 5 has 15 years' experience, a performance rating of 3, and a salary of $34,500.
Employee 6 has 12 years' experience, a performance rating of 5, and a salary of $32,400.

- Decide the amount of increase for each member.
- Prepare your recommendations for your supervisor that includes the following:

a. A table showing the original salary, the amount of increase, the new salary, and the percent of increase for each employee.
b. Show the calculations to verify that the total amount of increases is exactly 4% of the total original salaries except for rounding discrepancies.
c. Will the percent of change also average 4%? Why or why not?
d. What other factors could have been used to calculate pay raise?
e. Many feel that pay raises should reflect seniority only? Do you agree? Why or why not?

Solution Preview

I would suggest that you create your chart in Excel. Excel is a wonderful tool to enable you to have the computer do the math and you will be able to make adjustments and see immediately, the result of your adjustment.

Here is an outline for how to complete this assignment.

Step1. Decide on your criteria. Make sure your criteria is clear and defined.

For example, if you chose years of experience, then create some sort of relationship such as each year is 0.5%.
i.e. 6 years experience = 6*0.5 = 3% raise.

Step 2. Create a table in excel to ...

Solution Summary

Guidelines for creating a plan of distribution of salary increases base on employee experience and performance.

$2.19