Our pay scale keeps on changing each year, mostly (and hopefully) in the increasing direction. The changes in the pay scales reflect one or a combination of the following:
- employee's performance: One major factor in increase or decrease of payscale is how one performs his/her job. Generally, hard workers and efficient employees get a raise, while slackers don't.
- Company's performance: If the company is doing well, everyone (or most of the people) get a raise. If a company is in bad shape, payscales will fall.
- Demand and Supply: Payscales are also a function of the demand of a skillset and the supply of a skillset. If more people of the same skillset are available, payscales may fall.
- Competitiveness: A business likes to stay market competitive and retain talent and may need to increase payscale to this effect.
- Cost of living: With increase in cost of living, payscales need to rise so as to ensure that employees are not making less than last year's money (in real value terms).