[slgeorge]

- Stop publicly promising salary increases altogether. Promote people based on their ability, not an artificial loyalty policy. Some people deserve 10%+ raises, some you'll find are overpaid. Use a basic job ladder and put the burden on managers to justify comp changes.

A guarantee of annual salary increases is problematic for three reasons:

a. An increase of 3-5% is going to increase salary costs rapidly as it compounds. He mentions that salary is 80% of cost, so it means that costs are going up for doing the _same thing_ by 3-5% every year. Employees aren't a fixed unit of production (particularly in a tech firm) but there's not unlimited new productivity either. It's fine if your prices are also growing at those rates ... but I don't think many people are in those situations at the moment.

b. It takes away the meritocracy Salaries have to keep up with inflation, but beyond should be a mark of performance.

c. It's going to suck when they have to change it Things happen, this is an example, and employee morale is a sensitive matter.