1. What is a Merit Increase?

A merit increase is a pay raise given to an employee based on their performance, skills, and contributions to the company. Unlike cost-of-living adjustments, merit increases are typically tied to individual performance evaluations.

2. How Does the Calculator Work?

The calculator uses the merit increase formula:

Where:

• \( \text{Old Salary} \) — Current salary before increase
• \( \text{Merit Rate} \) — Percentage increase based on merit

Explanation: The formula calculates the new salary by applying the merit percentage increase to the original salary.

3. Importance of Merit Increases

Details: Merit increases help organizations retain top performers, motivate employees, and align compensation with individual contributions. They are a key component of performance-based compensation systems.

4. Using the Calculator

Tips: Enter your current salary and the merit increase percentage you expect to receive. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's a typical merit increase percentage?
A: Typical merit increases range from 2-5% annually, though this varies by industry, company performance, and individual performance.

Q2: How often are merit increases given?
A: Most companies provide merit increases annually, often tied to performance reviews.

Q3: Is a merit increase the same as a promotion?
A: No, merit increases are typically given for performance within the same role, while promotions involve moving to a higher-level position with greater responsibilities.

Q4: Are merit increases guaranteed?
A: Merit increases are usually discretionary and based on both individual performance and company financial health.

Q5: How do merit increases compound over time?
A: Because each raise builds on the previous salary, consistent merit increases can significantly boost earnings over a career.