HR professionals ranked providing larger merit increases last among compensation initiatives used in the past year.* Yet, consider that 95% of employees believe they are entitled to a merit increase. Employees view these increases as nothing more than a cost-of-living adjustment.

So what role does salary REALLY play in retention? More than you may realize. Don’t be surprised if your top-performers leave your organization to make more money. They know that the real “merit” amount companies use to reward performance has averaged a meager 1.2% for the past few years. A 1.2% merit increase may buy an employee a Grande Latte on the way to work every morning, but hardly leaves enough for a tip. Telling your employees “thanks a latte” is simply not enough.

Find out how your organization can avoid common merit increase pitfalls and develop a smart compensation plan that rewards your top performers.

*Source: WorldatWork 2006-2007 Salary Budget Survey