What is a reason behind a pay scale increase or decrease?

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gsenviro | College Teacher | (Level 1) Educator Emeritus

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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).

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