You are the owner of a toy company with a staff of six associates, and it is time to plan their merit increases with a 3% budget. Review the information and determine how you will allocate the merit increases by completing the salary planning worksheet, considering the available budget. If you exceed the budget, the difference will come directly out of your own earnings as owner.

SAM has worked with you since the start of the business 10 years ago. He has handled virtually

every job in the company at some point, and his experience is valuable. Hes currently serving as VP of

Marketing and is also a good friend. He is paid very well. Unfortunately, his performance has slacked off

in recent years. RATING: Solid

MARY joined the company about 3 years ago. At this point, she is a probably your strongest contributor,

You would most likely name her as your successor. She is currently serving as VP of Development. She

is paid a bit over the market. You fear losing her to competition. RATING:

Outstanding

BILL is a talented designer, but many find him difficult to work with. Just before he was due to complete

an important project for this year, he resigned for a higher paying job nearby. You talked him into

staying with a comparable increase in pay. Hes grumbling about pay again. RATING: Strong

SUSAN is young and inexperienced designer but already is showing the skills to be a potential superstar.

Shes very marketable. You will need to keep her challenged, well rewarded, and recognized. Shes paid

about average campared to the market. RATING: Strong

TOM is a good, solid performer no more, no less. He seems satisfied with his level and role. Hes paid

just below the value of his job. RATING: Solid

BETH is your former assistant who was moved into an entry level marketing role about 8 months ago.

Shes struggled in the new role. Her salary high because she was an excellent assistant. RATING: Needs

Improvement

Name	Current Base	Rating	Merit %	Merit $	New Base
Sam	$75,000	Solid
Mary	$60,000	Outstanding
Bill	$51,000	Strong
Susan	$40,000	Strong
Tom	$28,000	Solid
Beth	$30,000	Needs Improvement
Total	$284,000
Budget	$8,520

Complete the chart above and explain;

1-What was your overall compensation strategy when deciding how you allocated your merit budget?

2- How did individual performance ratings play a role in your decision?

3-Explain how you factored in the employee's contribution (past, present or future)into the decision.