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Determining the Size of a Meaningful Pay Increase

PAY INCREASES ARE IMPORTANT organizational rewards. Indeed, it is generally assumed that most employees see pay increases, rather than current level of pay, as the organization’s reward for performance. To be effective as rewards, they should be large enough to be meaningful. But how large is large enough? There are likely to be individual differences in this reward threshold. Compensation policies could be more efficiently designed and administered if the factors affecting these thresholds were understood and pay in-