Because pay-for-performance is an important factor governing salary increases, managers must be able to defend the compensation recommendations they make for their employees. Merit raises granted under a pay-for-performance policy must be based on objective appraisals if they are to achieve their intended purposes of rewarding outstanding employee performance. As managers know, however, other factors that can affect salary recommendations must be dealt with. These may include the opinions of the employee’s peers or extenuating circumstances such as illness or family responsibilities. The purpose of this exercise is to provide you with the experience of granting salary increases to employees based on their work performance and other information.

Assignment
Following are the work records of five employees. As their supervisor, you have just completed their annual appraisal reviews and it is now time to make recommendations for their future salary. Your department budget has $7,400 allocated for salary increases. Distribute the $7,400 among your employees based on the descriptions for each subordinate.
a. Janet Jenkins currently earns $37,000. Her performance appraisal rating was very high. She is respected by her peers and is felt to be an asset to the work group. She is divorced and has three young children to support.
b. Russell Watts earns a salary of $32,000. His annual performance appraisal was average. Several members of the work group have spoken to you about the difficulty involved in Russell’s job. They feel that it is a tough and demanding job and that he is doing his best.
c. Jack Perkins earns $27,250. His performance appraisal was below average and he seems to have difficulty adjusting to his co-workers. Jack has had a difficult time this past year. His wife passed away early in the year and his father has recently been diagnosed as terminally ill.
d. Rick Jacobson earns $25,000. His performance appraisal was above average. He is respected by his peers and is generally considered to be a “good guy.”
e. Paula Merrill earns $25,850. Her performance appraisal was very high. Her peers are upset because they feel that she is working only to provide a second income. Moreover, her peers see her as trying to “show them up.”