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Say Goodbye To The Annual Pay Raise

Say Goodbye To The Annual Pay Raise

Annual pay raises don't work. The salary increase serves two purposes: to motivate workers and to keep employees from leaving for a better-paying job. In its current form, the traditional raise does neither of those things very well.

"You can't really do a lot with the annual raise," said Evren Esen, director of survey programs at the Society for Human Resource Management. When the economy is decent, annual pay adjustments come in at 1 percentage point or 2 percentage points ahead of inflation for a given year. That doesn't go far. Employees expect to get at least the cost of living adjustment, and a measly 2 percent increase in pay doesn't do much to encourage or change...

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