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I feel your pain but if you don’t keep pace with inflation you’re likely to lose people to other firms where they can make more. When people leave, you have replacement costs — it may take time to find a replacement, you may have to pay that person more than the last one and it may not work out.
Bite the bullet and pay your people. Your true compensation comes in the form of your freedom from big firm tyranny and stupidity. Make your life easy — that’s the goal!
I am in the Midwest and our Christmas bonuses were insulting. We are doing merit based reviews now, but the scale is very low even for the top performers I suggested much more in terms of bonuses and for merit bonuses, but was ultimately out voted. I am sure we are going to lose a lot of people and we are already a small firm.
It sounds like your firm is already ahead of the curve. If you already made adjustments, I think merit based increases for some are more than appropriate.
We only do merit increases. This year, we’ll adjust the raise for ok performance up to account for inflation but won’t give mediocre or poor performers a 5% raise for inflation. Not worried about those people leaving.
I can relate to the pain, but the reality is that if you only do merit based raises you’re not giving raises at all. If someone has to bust their ass just to keep up with inflation, there’s no incentive. You will lose talent and more business in the long run.
I am not opposed to taking a pay cut for some of them, but not all. Also, the increase is permanent. It is not like once we are through the recession, you can take back the inflation raise. In addition, we went through a thorough evaluation of everyone's pay last year and made adjustments where necessary to make sure we were paying market rate. I should also mention we gave everyone a 5% bonus last month, and last year, it was a 7% bonus. What is everyone else doing with raises/inflation?