What to Consider with Cost of Living Increases

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raiseQ: Do you provide cost of living increases to your employees? Why or why not?

A: Money is a powerful incentive. “Of course, I want my team to have more perks than just a good paycheck. I strive to hire people who love their work and value enjoying what they do more than money, since passion has a longer shelf-life in job satisfaction. However, if an employee takes on more responsibility, they are rewarded with more money. Likewise, opportunities for additional project work are generally available as well.” Nicole Munoz, Start Ranking Now

Customize bonuses for each team member. “Most of my team members live in different cities: I have a copywriter in California, a programmer in Romania and a designer in Colorado. Each of their cost of living is vastly different. I take this into mind when I set up their base salaries, but then as I want to reward them with bonuses and promotions, I research what’s fair and what I can afford.” Rob Fulton, AudioLumin

Focus on market rates.
“Rather than providing employees with a strict cost of living increase, we regularly research market rates in our area for each position. If the market rates are increasing for a giving position (e.g., engineering), we’ll increase the pay for everyone in that area. This ensures that new employees don’t get paid more than existing employees when the market is ‘hot.'” Bhavin Parikh, Magoosh Inc

Give regular raises.
“I believe that you should give employees regular raises if they are learning and becoming more profitable or beneficial to the company. This raise should be more than enough to compensate cost of living expenses, and more importantly, the cost of keeping them happy and as long-term employees.” Peter Daisyme, Due.com/invoicing

Negotiate on an ad hoc basis. “Our 100 percent remote team is based around the world, and they’re free to change their location as needed. We don’t have an official policy on cost of living increases if they change their location, but we’ve made it clear to them that they can talk to us about anything they need to. At the same time, everyone knows that we’re bootstrapped, so we’re not going to be able to pay them huge sums of money.” Dave Nevogt, Hubstaff.com

Support a happy home life.
“If one of our employees has been on the team long enough to warrant a periodic raise, I feel it can only add value to our company as a whole. Having a happier life at home allows people to come into work with a clear mind, keeping them focused throughout the day and free of worries about life outside the office.” Phil LaBoon, WUDN

Take it into consideration, but don’t let it be the only factor. “Salaries should be adjusted at the beginning of an employee’s work relationship to reflect their cost of living at a comfortable standard. After that, salaries can be adjusted to reflect changing cost of living, but it’s not fair to only bump up an employee’s salary a few percentage points and say you’re done just because you gave them a small increase. A real raise is based on performance.” Jared Brown, Hubstaff Talent

Increases are earned, not handed out.
“We are all about giving credit where it’s due. If an employee performs for the company, we will motivate and compensate for that. Rewarding without some level of performance hurts the company in the long term and sets a bad precedent for the employee.” Hesam Meshkat, Guzu

(Source: TCA)