Determining Individual Merit Increases

• Individuals with superior performance can be recognized with review increases at or above the established merit allocation amounts. Individuals with average performance would receive lesser amounts.
• If an employee does not meet performance expectations, consider deferring a merit increase for three to six months to see if performance improves during that time period.
  • Before choosing this option, consult with your Human Resources Officer. The Deferred Merit increase should not be the first indication to an employee that a performance problem exists.
• For employees to understand their level of performance, communicate with them about their:
  • Established performance ratings
  • Department's corresponding merit ranges
  • Specific merit allocation

The Compensation Office, in conjunction with appropriate MIT senior leadership, develops initial recommendations for each of the Institute’s various staff categories.

Recommendations are prepared after careful study of

• the Institute's relationship to the outside market
• its salary trends
• general economic indicators, such as national and regional inflation and unemployment patterns
• local, regional, and national market data—including industry and higher education pay program trends—which helps ensure that MIT’s merit program is comparable to those in other industries, including higher education.

Initial recommendations are reviewed and approved by the Salary Subcommittee. The Salary Subcommittee Chair reviews the recommendations with the Executive Committee of the Corporation for final vote. Recommendations are evaluated in the context of the Institute's financial position and available funds.

Note: Review increases are effective on July 1 for Service Staff

For more, see the annual performance review schedule and the Annual Salary Review calendar.

• Lump sum merit payments are considered part of an employee's normal pay. As such, they are subject to taxes and are included in pension calculations.
• The term "lump sum" should be used exclusively for annual review allocations and not for other types of one-time payments.

• An employee's base pay is already high relative to current market data, as determined by Human Resources and the department.
• An employee's base pay is high relative to other employees with similar responsibilities, or is high within their level or grade.
• An employee's pay would exceed the grade maximum if a full merit increase is given to base pay.
• An employee's base pay is already at the maximum for their level or grade.

A manager or administrative officer may choose to provide a partial merit increase and an additional amount in the form of a lump sum. This may occur if an employee is a top performer and their base pay is already high in relation to:

• the maximum of their salary level or grade
• current market data and/or
• salaries of their peers

Example: An employee's salary is $50,000. The manager/department administrative officer wants to recognize the employee's superior performance with a significant increase (perhaps 5%). However, for any of the reasons stated above, the manager is hesitant to give the employee the entire amount as a base pay increase.

The employee might receive:

• a 3.0% increase in base pay, for a new base salary of $51,500
• the additional 2.0% ($1,000) in the form of a lump sum merit payment

• An employee's performance may be marginal and does not fully meet minimal requirements for the position and/or falls below performance standards.
• A deferred merit increase is generally recommended for times when:
  • The employee has a good work history.
  • You believe the performance problem may be temporary.
  • The employee understands that receiving a merit increase at the end of the deferral period is contingent on fully meeting the expectations of the position.
  • A performance improvement plan is in place.

If a merit increase is deferred due to performance:

• Contact your Human Resources Officer who will advise on the next steps if performance improves at the end of the three to six-month deferral period.
• The increase would be determined by the merit guidelines in effect at the time of the deferral.
• Funds for the (prorated) increase will be held in the Budget Office to be distributed when the raise becomes effective.
• Contact the Human Resources Officer so an appropriate action plan can be identified. If performance does not improve during the deferral period, the employee will not be eligible for a merit increase.

• The employee's annual performance review date would remain unchanged. Any merit increase received would be for the remaining six to nine months until the next regular review date.
  • Example: An employee's review date is July 1, but a merit increase is deferred for three months (until October 1). On or before July 1, a performance improvement plan is established and discussed with the employee.
  • If performance improves, the merit increase will become effective October 1, and the employee will receive 9/12th of the expected increase (for October through June). The employee's next review date will be July 1 of the following year.

At times, the merit increase must be deferred for non performance-related reasons, e.g., when the time frame for preparing the annual performance review must be extended. For example:

• A grant award may be pending and the availability of funds is unknown; however, the DLCI expects to receive notification shortly.
• The employee's department head or manager is unavailable because they are unexpectedly called out of the country or placed on a new assignment for a brief time period.
• The process of review involves several parties and will extend slightly beyond the ASR due date.
• The employee has only been in the position for a short time despite being eligible for review, and the department head or manager is not yet comfortable reviewing the employee's performance.